FAT32
Maximum number of files on disk: 268,435,437
Maximum number of files in a single folder: 65,534
NTFS
Maximum number of files on disk: 4,294,967,295
Maximum number of files in a single folder: 4,294,967,295
It says you cannot have more than 65,534 files in a folders on a FAT32 volume, but things will start happening before then. I have seen a report of a folder with 10,000 files in where Windows Explorer crashes after reading around 3500 file names. Lots of long filenames with similar beginnings is going to make the short-filename generation feature exhaust resources and cause slowdowns and crashes.
If NTFS is the filesystem, it may not be the FS which is borking out, it may be Explorer. Very large numbers of files will slow it down to a crawl. Any way, a disk check wouldn't be a bad idea. Perhaps a defrag too?
Screenshots would be nice, or failing that, details of the file count & space used as shown in the Windows Explorer status bar, and the file count and data used figures which are right at the end of the output of DIR /S in a command prompt window.
The OP has fallen silent, which may indicate that the "penny has dropped", but who knows?