Can you E-Mail us the entire log file(s). We'll keep them private. I think the more interesting bit of the log was before the snippet you posted.
If you had reached the file limit then there should have been a message in the log further up.
You can select the access mode in the "Select device to add" window. See below.

The items circled in blue result in direct access mode being used (by passing the file system). In this case the sectors on the disk (or disk image) are read and the NTFS structures are directly parsed by OSF. Hidden files can be seen and file permissions are ignored.
The red items result in the file system being used. In this case the disk is accessed via the standard operating system API calls, like ReadFile(), and NTFS permissions are enforced by the operating system.
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