The shell expands that * into a list of filenames and then tries to run the rm command with that list. But there's a limit to how long that list can be and you exceeded it.
Since you are using the full path, you might try a relative path instead:
cd /var/spool/mqueue
rm *
Now each individual file no longer has the /var/spool/mqueue/ prefix so the expanded command is much shorter. But if this is still too long, you can try this...
cd /var/spool/mqueue
ls | xargs rm
The ls produces a list of file names which xargs reads. It then assembles them into a bunch of rm commands. It knows how long each one can be and it won't assemble a command that is too long.
But are sure that you want to do this? You are going to discard all of your mail! My idea of clearing the queue is
Yes I am sure...I made a script to email all of my 2,000 members but I forgot to put in the "from" part so my mail queue was filling up with error messages. The queue was over 2.5 MB at one point.