Hi straussc,
Firstly, for SQL Server Express, it has the following limitations:
• 1 physical processor
• 1 GB of RAM
• 4 GB database size per database in SQL Server 2005 Express and SQL Server 2008 Express , 10 GB database size per database in SQL Server 2008 R2 Express and higher versions of SQL Server Express.
Secondly, based on my research, all customers of Azure Active Directory and Office 365 have a default object limit of 50,000 mail-enabled objects (users, mail-enabled contacts, and groups) by default. Assume that you use SQL Server 2008 R2 Express or
higher version, when the total objects are more than 50000, it will cause your SQL Server Express databases to hit the 10 GB limit, then you need to set up a full SQL Server instance.
Thirdly, for DirSync issues, I would like to recommend that you ask the question in the Microsoft Office 365 forum at
http://community.office365.com/en-us/f/default.aspx. It is appropriate and more experts will assist you.
There are also some articles about DirSync for your reference.
http://blog.gocloud-security.ch/?p=1622
http://technet.microsoft.com/en-us/library/jj151831.aspx#BKMK_ObjectLimits
Thanks,
Lydia Zhang