The Decoding Salesforce blog has a good post on working around the formula compile size limit. In short, it’s a way to span your large formula across 2 formulas and compile them in a particular sequence so Salesforce doesn’t realize its over its limit. Nice hacking!
I think this workaround may be needed less in the future, however. I am quite certain that the formula field compile size is getting increased to 5K with the Spring ’07 release.