I am also devloping software with the .NET provider and getting sporadic "SQL0519 Prepared statement S000001 in use." messages.
We use two methods to retreive data from the iSeries in our applications, either direct SQL statments or calls to pre existing RPG programs (or rather, CL programs that in turn call RPG programs).
This error only occurs when using direct SQL statements, and only on occasion. Once it has occurred, the call seems to stay blocked for about an hour and a half before working again.
Has anyone else determined what causes this issue?