The vswitch counts as 1 stack on the OSA, no matter how many systems are behind it. So yes - it gets you around the 640 stacks per OSA issue. That limitation came from the number of subchannels you could generate on the OSA chpid itself. I think it's even higher than 640 for the recent z10 and the newest OSA adapters.
I don't think there is an explicit limit to the number of guests you can connect to a vswitch, but I think you'll run into network performance issues with too many systems in the same broadcast domain before you hit any architectural limits of the vswitch itself. I don't know about you, but I've never actually seen 800 systems on the same layer2 network. It may be better to fence off those 800 machines into 4 separate logical VLANs of 200 systems each. They can all run on the same vswitch under VM, but you have to break it up so the broadcasts don't clog it up. This is only a concern if you're running systems that do lots of broadcasts, of course. -- Jay Brenneman