Limit is 750 images and 6 subfolders deep. The idea is to prevent a crash when someone points Spine at C:\ or just \ and it tries to load every image on their hard drive. The limits can be raised, but I find it odd to need so many subfolders...
Edit: note it's 6 subfolders deep. Only images count against the 750, you can have as many subfolders as you want.