Wrong.
The issue can be that there is an existing roll-up summary field on the master object, which prevents from convert a master-detail field to a look-up field.
There is no maximum number of look-up fields, and you can convert a master-detail field to a look-up field even if the field is required, or even if the master and detail objects are both custom objects.
Link to Salesforce Help : Notes on Changing Custom Field Types
Right.
The issue can be that there is an existing roll-up summary field on the master object, which prevents from convert a master-detail field to a look-up field.
There is no maximum number of look-up fields, and you can convert a master-detail field to a look-up field even if the field is required, or even if the master and detail objects are both custom objects.
Link to Salesforce Help : Notes on Changing Custom Field Types