These notes supplement Mika's video. Go watch it!
A look through decompiled code suggests the code that throws this exception is present (with the same error message) since at least Alpha 1.1.2 (the oldest version that happens to be in my decompiler repository), suggesting Notch wrote it.
The optimal chunk loading pattern is for the chunk to load on even ticks and unload on odd ticks ("unknown" chunk tickets caused by block updates last one tick, so this is the max). For this to happen, the chunk has to have completely finished loading in the first tick so that it can be unloaded in the second. This is made challenging in modern versions since Mojang moved entity loading to a background thread, so the complete loading of a chunk can take theoretically any amount of time - since it isn't synced with the main thread there is no way to know when it's completely finished. This means the optimal entity count depends on your exact server configuration and hardware because you want to target an amount of entities that takes just long enough to chunk load to fit into a tick. Interesting things do happen if you go above this limit though, mess around and see if you find anything. :D
It's worth noting that entities with less NBT load faster - snowballs are easy to use and don't have much NBT but there is better options if you're willing to opt for something more expensive. I believe minecarts or boats are optimal for survival players.
fun tidbit: Before we realised you could just reload the chunk with redstone, we were doing it with a player riding a horse, itself riding a minecart, crossing a chunk border.
Despite looking extensively, we couldn't find a way to get true shadow items with this bug - Mojang has learned since the previous suppression bugs and written their item handling code more defensively now. If you find a way, let me know and I can edit a link to your post/video/etc here. That being said, there is some unique shadowing tech with this bug that wasn't mentioned in the video for brevity:
A (to my knowledge) shadowing technique exclusive to Entity ID suppression. By suppressing the dropping of an equipment item (such as armor) when a player dies (to a player source, such as another player, fall damage, or /kill in chat) you can cause the item to be dropped in the world and stay on your player. This allows creating non-stackable shadow stacks, which isn't possible with the furnace method.
By staying in the nether and overflowing the entity ID in the overworld back to your entity ID, then dying in the nether (with a respawn point/world spawn in the overworld), you can respawn in hardcore.
I'm sure there is many more things to discover with this bug that we didn't find or get around to. Nearly any point where an entity is added to the world is a target. Go forth and exploit :D
waaaaa