A slight addition to Idoru's first answer:
You are not allowed to run another public PlaneShift server for player use. You can have a private server for your own testing purposes, but that is all. With modifications, it depends - what exactly are you planning to do? If we have details, we can better explain the legalities. If you are going to provide your own art, your own rules, content, etc., and basically make it another game entirely, you are welcome to - the code is opensource after all. But everything PS-related would have to change in regards to our art and story.
I believe the 200 player limit is solely a thing of Laanx, our current server. There is no limit coded into the game itself, so whatever your server can handle. But again remember that public servers for playing the game are not allowed. To run a public server you must be approved - and thus considered reliable and trustworthy, no small feat by any means.