MSDE Limitations

An MSDE database can be no larger than 2 GB (this includes MDF and NDF files only — log sizes are not included in the size limit);

MSDE does not support SQL Mail

As of July 2004, these are the planned limitations of the next generation of MSDE, now known as SQL Server Express (which will still be a free product):
1 GB memory (for buffer, not total);
1 CPU;
50 named instances per machine;
4 GB per database (not including log files);