If you actually save it as a .xls you will lose the functionality.
Part of the warning states:
Data beyond 256 (IV) columns by 65,536 rows will not be saved. Formula references to data in this region will return a #REF! error.
As you know in 2007 onward the worksheet size is 16,384 columns by 1,048,576 rows, while the worksheet size of Excel 97 through Excel 2004 is limited to 256 columns by 65,536 rows.
So the warning is telling you that data in cells outside of this column and row limit will be lost if you save it in Excel 97 format.