No dice. I added ReadOnly=1, but I ended up with the same error. Our two snippets seem very different though, so I'm not sure how they match up exactly. I do notice you're accessing the C-drive, which I can do fine. It's just the share drive that is giving me trouble. My changed code is:
INSERT INTO table SELECT * FROM
OPENROWSET('Microsoft.ACE.OLEDB.12.0',
'Excel 12.0;Database=//server/folder/file.xls;HDR=YES;ReadOnly=1',
'SELECT * FROM [Sheet1$]')