Edit the file "startup" with a text editor. The start will look something like this:
#! /bin/csh -f
# Set the port number.
set port = 9500
if ( "$1" != "" ) set port="$1"
# Change to area directory.
cd ../area
# Set limits.
nohup
limit stacksize 1024k
limit coredumpsize unlimited
if ( -e shutdown.txt ) rm -f shutdown.txt
The lines beginning with "#" are comments. So, put "#" in front of the "limit" lines.
Also, it may be running normally but in the background so you don't see it in the Cygwin shell. The reason I say that is because when I enter ../src/startup from the area file, I get the limit error too, but a few seconds later, my firewall tells me the server is going active and I can log into the game. Personally, I prefer to use the command ../src/smaug to start the game manually so I can see what processes are taking place in the shell. The only time I use startup is if I need to use grep or something while the game is running. Just my two cents worth.