When Jetty runs out of threads you should do a Thread Dump on the JVM to see what your threads are doing.
It's quite possible that some of your threads are deadlocked in your application or database and are sat waiting for something.
This sometimes happens to us when we have database problems - we use 250 threads and when there's a database deadlock you can see most of them stuck on a socketRead to the database.
Hope that helps,
I am facing the same problem as faced by you in Dec 2001.
We are facing the same problem and need some insight on how you got out of the situation.
Please help me out as soon as possible.