The release not for 6.3.2 mentions:

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iff you're in a directory on a remote machine, and you pipe the output of a command to xargs, and you redirect the 
output to a file, you get a “cannot fork” error. For example:

cd /net/remote_machine/tmp
find . -type f | xargs grep FAIL > report.txt
/bin/sh: cannot fork - try again
    
It seems to be a problem with permissions. Piping the output of xargs to less works. (Ref# 29834) 

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I have the same problem when using mkifs:

cd /net/...
mkifs qnxbasesmp.build >whatever

I get:

sh: cannot fork - try again
Unable to link relocatable elf file /usr/qnx630/target/qnx6/x86/boot/sys/startup-bios