Indeed, the descriptions concerning the construction of Memo fields in the documentation, while not technically incorrect, are a little bit misleading.
The documentation states, truthfully, that Memo fields have a maximum length of 65,536 characters.
What the documentation doesn't state is that you can't paint a single field wider than 254 positions.
Take the demo file Homes.prn for example. The entire description for the last home in the report can be captured as a Memo field, and has a total length of 440 characters. But it only needs to be 57 positions wide.
The only way I know around it is to define as many 254 wide Character fields as are needed and compile their contents with a calculated Memo field.
A bit messy and time consuming, but it works.
I'm certain that there's some Jet-related technical reason behind the 254 wide limit, but nonetheless it can be a constraint at times.
Use the Field List to adjust field definitions via the keyboard.
Nor sure this idea will work for you but you could consider a 2 stage process and use Multi column regions. Make each column quite wide - up to 254 chars OK I think - and extract.
Add a LINE() calc field resort to stack the columns back toether. In V10 I would also use the COLUMN() function to ensure the correct order and sort with that. V9 is a little more compex - checkout the post in the Aug 08 newsletter archive based on Olly's work.
Now you have the possibility to export an intermediate file that should be more model friendly and can be used to create a multi-row extract to a memo field (if required) BUT MEMO field do not retain all spacing as was so there may be some other issues specific to the report format you are working with.
You may be able to adapt these ideas on some way to better suit your purpose.