A bit outdated thread but just noticed it, anyhow, the info you found made sense and would very likely to be the cause of the limitation. As soon as I read the number I thought of the 16-bit system.

It is not possible for Microsoft Excel to go beyond 65,536 rows in asingle worksheet (also known as a sheet or a spreadsheet). If yourequire more than 65,536 rows, you will have to split the informationacross multiple worksheets.There is also a limitation on the number of columns and characters ina single cell per worksheet. At most 256 columns and 32,000 charactersin a single cell can be used per worksheet. Again, to get beyond thislimit in Microsoft Excel, one will have to open a new worksheet.As pdreyn-ga points out in the Comments below, if you require usingthat much data, you may want to look into database alternatives, suchas Microsoft Access.
http://support.microsoft.com/kb/120596