We use Subversion here, a source code revisioning tool. This tool leaves a ".svn" folder in every directory in our working source code tree (it's web development, so we have a working copy on our local machines, and we upload on save to the server for testing. We do it this way because it works both in the office and on the road, so emergency development can happen anywhere we can check out the source code from). So, when we're using "Keep Remote Directory Up to Date", every time we do something with the repository (checkout/update/delete/etc.), WinSCP goes insane, uploading lots of little files that are stored in those .svn directories. It doesn't crash, it just takes a long while to deal with the update.
To give you an example of the directory structure we're talking about:
(root) |->file_a.txt |->file_b.txt |->.svn |->entries |->...(more files here)... |->dir_c |->file_c.txt |->.svn |->entries |->...(more files here)...
Every subdirectory have its own ".svn" folder with stuff inside of it.
We don't really care about those files, and would prefer if the .svn folders and everything in them weren't even uploaded to the servers. We've already tried the filters significantly, and there does not seem to be a way to make the filters ignore .svn *directories*.
The other problem these directories create is that inside these .svn directories are many more directories that we also don't care about. They cause the entire site tree directory count to bloat severely. Now, I've already built my own slightly modified version from your source code that allows me to use many MANY more than 500 directories (and it works just fine, doesn't seem to bog the system down too much). If we didn't have to even check those .svn folders at all, the directory count would be sooo much lower, and definitely within the safety range of 500 directories. But all those .svn/* files changing all the time are causing definite lags of minutes before we can continue getting our code pushed up. Regular working and saving goes just fine and snappy.
If there is some way that we can get the filter to apply to directories as well, it's the last piece that I can find to make our development environment magical. :)