Hi A.J.,
We've seen this error when the number of columns exceeds the maximum number of columns that Excel allows. About the only workaround I can offer is to create a custom report to limit the number of requirements in the columns using the where clause. For example, you could limit it to a specific type of requirement: $matrixColumnRequirementsSortID where Type = Functional. Or a specifiic priority, or any property to cut down the number of columns. You could then have multiple matrix reports, e.g. one for each type of requirement.
Another option, you could limit the report to a specific package when you run it, but if you do this, it will only report the use cases and requirements in that package. If there are references from a use case to requirement in a different package, that requirement won't show.
And one more idea just occurred to me - change the $matrix keyword to: $matrixColumnReferencedRequirements (ReferencedRequirements instead of Requirments). This should eliminate requirements that don't have any references. If all or most do, then this won't help you.
Sorry about this, but it's an Excel limit that we can't control. Hope one of the workarounds helps you out.