Ken,
The hosts file is often seriously augmented by "good" programs, such as SpyBot, that enter large numbers of bad domains, resolving them to 127.0.0.1.
So what it should and shouldn't say is not about the quantity of entries, more about the names and associated IP addresses. If anything that you don't recognise points to an IP other than 127.0.0.1, that is suspect.
SD