I happened to get dropped from NWN by an error, and on logging back in found that the server limit shrank. I've been watching for at least 10 minutes or so as the number of people logged in falls from 34 or so. Does this happen often, or just a random error, possibly even client-side?

It happens when big events happen IG.

Yes, we shrink the player cap sometimes when major events are running to reduce lag. The player cap will raise back to 50 later today!