I have the same problem. My file was 2,854KB. Its password protected because its sensitive data. I tried shortening the name to 9 chars and .xlsx (I use Excel 2007 which is supported). I also increased my cache to 500mbs in the settings. I also re-booted the device and opened only this app with only file right from the re-boot. I also do not have a jailbroken iPad.
In my case I was able to contact them. I didn't like their response (i.e. post it in their ideas section, or send us your password file and we'll have a look at it (come on!)).
It isn't the file. Its the app.
I got this app for the sole purpose of opening Excel files like this size (~3 MB files) and playing with it on my iPad instead of my PC. I don't consider my file to be rather large...but rather average in size. Had I had a 100MB file, well I can understand some issues....but 3MBs???!!!?? Come on!
Unless they fix this rather small issue, they only get 1 star in my books, and I would very happy for a refund.