Yeah, I have seen it first hand. Admittedly, there was some redundancy and some excess in the folder names, but it was for a relatively large project that was organized with fairly deep levels of sub-projects and tasks. If you happened to be working on one of the sub-projects that had a longer, more verbose title, you would run into this issue.
Social implications of a size limit can be quite large. Non tech saavy team forced to restart work (half of them will lose the file if saved in a temporary location) after waiting for someone to explain them this additional rule.
Yep, that's the sort of project path structure which was causing me grief. Excel then gave me a warning with a list of 6 possible issues, none of which mentioned the 218 limit.
C:\Users\reasonableusername\Documents\Work\CompuGlobalHyperMegaNet\Non-Project Documents\Administrative\Business Contracts\Fiscal 2013\First Quarter\February\Week Two\TPS Reports Cover Sheet And Memos Template - 3.xls