The only limitations for SQL Express are the 1GB limit, the use of only one CPU and the 4GB database. There are some other minor differences.
We are getting user instances and SQL instances mixed up. When you install SQL Express it asks you if you want to make a named instance or a default. It is best to choose default and you will have an instance with the name of SQLEXPRESS. This instance can be shared to many applications. On each application, you can allow it to install to that instance or have a named instance. There is really no need for a named instance unless you want a differently configured instance.
The user instances which may or may not be on as a default and my guess is they can't even be used with AC's default installation is used by user who are non-administrators. User instances allow you to move databases and connect with the user instances. While there is a 16 user instance limit, this is not affecting your ~ 30 computer network as you are only using the one either default instance or named instance. The SQL Server Express Engine can handle many instances and applications.
I am not sure what is causing your problem, but it does seem evident it is something within v5. On the other hand, many other users (albeit not as big), are not having that problem so maybe it can't be blamed on v5. Some things seem obvious, but they are not. You must have uninstalled v4 to install v5 both the only two SQL database versions.
The only limit that I see possibly affecting the perforance would be the 1GB. But, I doubt that is the problem, and I don't know why v4's RAM needs would be different than v5. Have you used Task Manager to monitor how much RAM it us using as you add more computer users.
Also, have you tried troubleshooting by starting with only a few computers and adding one at a time? Or any using the non-terminal server computers? How often do you get the drop? Is it often enough that troubleshooting in that way would work?
How often have you reinstalled v5? I think a network issue is just as likely as a program issue. It isn't like you used versions 4 through 10 only to have issues with 11. I would be a little wary of the XP Home versions, although I don't know why they would be overall problematic.
If you run v5 on just one self-contained machine are there problems? Or can you run v5 on the server? It is still connected to the same database.
I would urge you not to change EMRs only because of this issue. I understand it must be making life miserable, but there has to be a solution. My next comment will be in a separate post.
