It appears that my current equipment could easily handle even 4096 shadows, but they have visibly jagged edges especially when looking back in my 109. If I choose Smooth Shadows, the sawtooth will vanish, but then I'll get pitch dark tattered spots in certain places. For what I understand it seems like they'd appear where multiple shadow lines meet, like the shadows of vertical and horizontal window panes. It's very disturbing to see a tar amoeba peeking behind the back rest! With higher resolutions it looks more like a small shredded hole that's moving.
XP pro, 4 Gb ram @1066, Intel E8500, Radeon 6970. No AMD control panel, all settings done in AH.