The above issue was caused by having my UEC set to 50GB limit for
volumes. I changed it to 200GB under "Configuration -> Clusters -> Disk
space reserved for volumes" and it allowed me to create 194 of them.

It then started having problems from what appears to be a different but
related bug of not properly cleaning up after failed/unavailable
volumes. I am still testing that problem though.

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SC: Maximum number of loop devices should be configurable
https://bugs.launchpad.net/bugs/586134
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