Sounds like a loop-error. Have you used a hierarchical group structure, e.g. does your group refer to another group which again might refer to a group? We sometimes have the problem that someone wrongly assigns a hierarchical group to refer to itself and then we get this error. Hope this helps.
From the help file: What happened
You can send mail to a user group containing the name of another user group, a feature called nesting. The address in your active mail message exceeded the number of levels of nesting that Notes allows
It sounds like your group has a group(or groups)as a member that has a group as member that has a group as member.....
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