Does a I Series have a limit to the number of telnet connections? Like a a license limit or user limit or something I should be aware of?
If you're using the 5250 emulator that comes with Client Access, each connected user will consume a license of the "iSeries Access (5722-XW1)" licensed product. The license is for use of the Client Access software, not use of the server component. So, if you're simply using telnet or TN5250, you do not need to worry about 5722-XW1 licenses.
As dmc said there are no license limits on telnet, but you do need to make sure you have enough virtual devices (or are allowing automatic creation of devices in the system values.
QAUTOVRT Autoconfigure virtual devices
QAUTOCFG Autoconfigure devices
You should probably also be aware that telnet sessions count as interactive load and this may create limits on performance if you have large numbers if intensive sessions open.