what must change when adding multiple subnets to a flat network

you will have to configure a different vlan for second subnet on the switch. If you have an L2 switch then you will have to use "router on stick" configuration. Otherwise you can use L3 switch and apply below command:

conf t
ip routing
exit

You will have to create vlans in L3 switch as well...

Is there any other way other than setting up vlans.  

Another solution is to renumber the network in its entirety changing the gateway and all the static devices to a larger subnet.  Or you need to route the networks somehow.

the devices only connect/communicate to the servers and the internet, if this matters. the routers has the second subnet setup and workstations that are configured will access the internet correctly. my problem is that when the workstation with the 2nd subnet communicates to the servers, dns tells the they are in the other subnet and they walk across the router and back to the server in subnet 1 which will swamp the router and internet connection.  Is there a way to route the 2 subnet at the core switch?

core switch has a routing capabilities...you can create two vlans and apply below command:

conf t
ip routing
exit


You will have to create one management vlan for connecting to router...
and you issue will be solved...

the switch is a 3com 5500g and does not recognise that command

I am not conversant with 3com switches...you must be knowing how to enable routing in 3com switches....

what sould a generic route between 2 subnets look like configured on a switch?

In Cisco, when you create two vlans and apply ip routing command...inter vlan routing is enabled...

Just go to the below mentioned link:

http://www.tek-tips.com/viewthread.cfm?qid=1281900&page=17

A quick browse of that switch shows that it can route vlans you just need to create an VLAN interface in each vlan and set that as the default gateway for each client in each respective vlan, no need for a command to turn on ip routeing seems to be on by default, unlike cisco.

how do you get the dhcp server to only hand out ip address from a certain subnet to certain vlans.

The command in cisco is IP helper address but the concept is DCHP relay, the DCHP server knows what gateway the request comes from if there is some sort of relay occurring so it will give an address to the correct subnet.

so when setting up vlans
1. configure core switch with multiple vlans lets say 3, one fore each subnet
   a. configure static routes between vlans "if not done by default"
   b. configure dhcp relay between vlans
   c. tag vlan ports on core
2. configure connecting switches for vlan
     b. configure connecting switches vlan to correspond to connecting vlans on core

Is that pretty much it or am I missing something

Everything looks ok, that last part you just need trunk links they carry all VLANs between switches.

does the vlan ports that connect switches have to be tagged on both sides?
example
switch 1 "core" port 5
switch 2    port 1

sw1 port 5 should be a trunk link-type that is tagged to vlan1
sw2 port 1 just tagged to vlan1

Thanks for all your help. I have been able to accomplish this on my test enviroment. my steps were
1. create vlans on core switch
2. create vlan interface for each vlan with ip address on individual subnets
3. configure trunk for contecting switch ports on core and associate to corresponding vlans
4. configure trunks on connecting ports for otlying switches
5. configure valns on outlying switches
6. tag ports
7. configure static route to internet router
8. configure dhcp relay on core switch
9. configure dhcp to hand out 2nd subnet and corresponding gateway of vlan interface

will be trying this on our production enviroment in small steps

never got a follow up on the last question. but the primary question on what needs to be done was answered.