It's when they're 'multiplying so fast' that bad things happen. The strain of them trying to multiply enough to chew through your wort causes them to kick out off flavors and such. You want to pitch enough yeast that they don't have to strain so much.
Assuming you were about 1.056 or so, the yeast pitching calculator at mrmalty.com says that, in order for you to have pitched enough yeast, you should have either made about a half gallon starter or pitched two yeast packs. You only pitched one pack (and a slightly old one at that) so yeah, you underpitched.