First off, you know you can scroll/pan around images, right? However, I agree a 32×32 one would be epic. It would be very expensive though, and I would probably have to run a minimum 1000 32×32 grids to get the price at all reasonable (since a panel of that size doesn’t exist using bright LEDs). Power requirements would also be 4x. Yuck.
As for microcontroller, that’s beyond the Arduino’s capabilities. I would probably use something like the Teensy or Spark Core.
Anyway, yes, food for thought.