It must have been a glitch. I went back on the game to check and I'd lost 3 more villagers (from old age). It's now letting me breed them back up to my limit, currently at 97 and he was still going when I last checked.
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2X Intel Pentium4 CPUs, 3.40 GHz
2 GB RAM
232GB-NTFS & 180GB-FAT32
Windows XP Home SP2
DirectX 9.0c (4.09.0000.0904)
NVIDIA GeForce 7600 GS 512.0 MB
Realtek AC97 Audio