“Warning! – Expanding the Excluded Members field exceeds the field limit. Please remove some people/groups and then remove this warning”

Thanks to the 32K restriction of indexed document fields (described here http://www-01.ibm.com/support/docview.wss?rs=0&uid=swg21087474) you can never rely on this feature to work properly in larger environments. The error itself occurs when the server tries to expand the members of the groups written to the ExcludedMembers field.