Just a note -- built-in file sharing in System 7 has a limit of eight connected clients (or maybe 7). We tried to play network Spaceward Ho one time, which relies on file sharing the game file and folks kept getting kicked off the game. Spent hours trouble-shooting the hardware adn didn't realize it was a software limitation until days later. This is unlikely to matter, as one rarely has several machines accessing the same server simultaneously, but I like to mention it to possibly save someone else the headache down the line.
Of course, you should be able to physically network as many localtalk machines as you like. They just can't all connect to one server at a time if there's more than seven or eight of them.