What version of Excel are you using? Its requirement is Excel 2002 or higher.
Here is the excerpt from RS Books Online
Excel Rendering Extension
The Excel rendering extension renders reports that can be viewed and modified in Microsoft Excel 2002 or later. This rendering extension creates files in MHTML, which carry a MIME type of ms-excel and contain HTML meta tags and XML data islands that are specific to Excel. While the Excel rendering extension renders HTML, the rendered report is intended to be viewed in Microsoft Excel, not in a browser.
Resources, such as images, are embedded within the report. For more information about designing reports for the Excel rendering extension, see Designing for Excel Output.
Hope this helps!