Same here, for a 'merge' using a DNS name that could not be resolved, using the smart server:
$ bzr merge bzr://bzr/vp-3.1-hot-installer
The dns name 'bzr' was not known on my machine and it caused the same problem. Perhaps any connection error causes the above message?


bzr: ERROR: bzrlib.errors.TooManyConcurrentRequests: The medium '<bzrlib.smart.medium.SmartTCPClientMedium object at 0x8473d0c>' has reached its concurrent request limit. Be sure to finish_writing and finish_reading on the currently open request.

Traceback (most recent call last):
  File "/usr/lib/python2.5/site-packages/bzrlib/commands.py", line 857, in run_bzr_catch_errors
    return run_bzr(argv)
  File "/usr/lib/python2.5/site-packages/bzrlib/commands.py", line 797, in run_bzr
    ret = run(*run_argv)
  File "/usr/lib/python2.5/site-packages/bzrlib/commands.py", line 499, in run_argv_aliases
    return self.run(**all_cmd_args)
  File "/usr/lib/python2.5/site-packages/bzrlib/builtins.py", line 2901, in run
    location, revision, remember, possible_transports, pb)
  File "/usr/lib/python2.5/site-packages/bzrlib/builtins.py", line 2979, in _get_merger_from_branch
    possible_transports)
  File "/usr/lib/python2.5/site-packages/bzrlib/branch.py", line 142, in open_containing
    possible_transports)
  File "/usr/lib/python2.5/site-packages/bzrlib/bzrdir.py", line 826, in open_containing
    return BzrDir.open_containing_from_transport(transport)
  File "/usr/lib/python2.5/site-packages/bzrlib/bzrdir.py", line 847, in open_containing_from_transport
    result = BzrDir.open_from_transport(a_transport)
  File "/usr/lib/python2.5/site-packages/bzrlib/bzrdir.py", line 806, in open_from_transport
    return format.open(transport, _found=True)
  File "/usr/lib/python2.5/site-packages/bzrlib/bzrdir.py", line 1733, in open
    return self._open(transport)
  File "/usr/lib/python2.5/site-packages/bzrlib/bzrdir.py", line 2613, in _open
    return remote.RemoteBzrDir(transport)
  File "/usr/lib/python2.5/site-packages/bzrlib/remote.py", line 76, in __init__
    response = self._client.call('BzrDir.open', path)
  File "/usr/lib/python2.5/site-packages/bzrlib/smart/client.py", line 111, in call
    result, protocol = self.call_expecting_body(method, *args)
  File "/usr/lib/python2.5/site-packages/bzrlib/smart/client.py", line 124, in call_expecting_body
    method, args, expect_response_body=True)
  File "/usr/lib/python2.5/site-packages/bzrlib/smart/client.py", line 69, in _call_and_read_response
    readv_body=readv_body)
  File "/usr/lib/python2.5/site-packages/bzrlib/smart/client.py", line 39, in _send_request
    protocol_version)
  File "/usr/lib/python2.5/site-packages/bzrlib/smart/client.py", line 94, in _construct_protocol
    request = self._medium.get_request()
  File "/usr/lib/python2.5/site-packages/bzrlib/smart/medium.py", line 589, in get_request
    return SmartClientStreamMediumRequest(self)
  File "/usr/lib/python2.5/site-packages/bzrlib/smart/medium.py", line 764, in __init__
    raise errors.TooManyConcurrentRequests(self._medium)
TooManyConcurrentRequests: The medium '<bzrlib.smart.medium.SmartTCPClientMedium object at 0x8473d0c>' has reached its concurrent request limit. Be sure to finish_writing and finish_reading on the currently open request.

bzr 1.6rc2 on python 2.5.2 (linux2)
arguments: ['/usr/bin/bzr', 'merge', 'bzr://bzr/vp-3.1-hot-installer']
encoding: 'UTF-8', fsenc: 'UTF-8', lang: 'en_US.UTF-8'
plugins:
  bzrtools             /usr/lib/python2.5/site-packages/bzrlib/plugins/bzrtools [1.5.0]
  gtk                  /usr/lib/python2.5/site-packages/bzrlib/plugins/gtk [0.93.0]
  launchpad            /usr/lib/python2.5/site-packages/bzrlib/plugins/launchpad [unknown]
  rebase               /usr/lib/python2.5/site-packages/bzrlib/plugins/rebase [0.3.0]
  xmloutput            /usr/lib/python2.5/site-packages/bzrlib/plugins/xmloutput [0.5.0]