there are limits to everything in flash and you may be encountering that particular limit.
in any case, you shouldn't attach your sound to the timeline. use actionscript to instantiate, play and fade your sound.
Oddly enough if i stick the same clip on another layer towards the end it will let me edit the sound envelope beyond 2966.
I don't have the clip directly on the stage, its in a sublayer.
I'm honestly not very good with actionscript and know very little. So I have no idea how to get actionscript to "instantiate" (not sure what that means I know it has a reference to duplicating) nor play or fade it aside for some scripts and commands i grabbed off google.
In the end i found some code i copied and pasted that did the trick for me but it would still be nice to understand this better way you are telling me about.
are you using as2 or as3?
this particular project used as2 but i wouldn't mind knowing how to do it in as3