Prospect limit: I don't think you need a limit as long as players lost prospect status once they were carded. Losing prospect status once a player is carded is the key, otherwise then you would need limits. With one 4 prospect draft per year (plus trades ) I think most owners would usually not have more than 8-10 prospects at a time. It would actually be easier for everyone to track things this way, since you would not have to worry about how long a prospect had been on your roster.
The prospects would not count against the main roster, they would be in addition to it.