How many domain names do you think is the limit?

Hi guys,

I got a hopefully quick question.  I am designing a site currently that is made up of many different domain names as part of a network. I've heard that Google will penalize however is linking is passed back and forth between these domains if the registrant information was the same.  I have WhoIS privacy information on all the domains to stop telemarketers and spam as well as (hopefully stop Google from getting suspicious).  I'm not doing anything bad or against Google rules but I can see how they might think that if I have a huge network and links are being passed between these.  It's a friend of mine who owns like 2000 domains and he wants to put legitimate information on each one and rank them higher, it's an interesting concept but I won't go into to much detail.

So my question is basically, does having WhoIS privacy on all these domains, will it affect me in anyway in the SEO process? Will google count the links passing back and forth as legitimate? Or might it get suspicious and think I am spam? Are there ways to see what server it's coming from? Should all these sites be on different servers?

Any help is much appreciated!