Not sure what you mean by "Meggy Peggy" -- Peggy is a name for our pegboard-style LED displays with discrete LEDs, and Meggy is a name for our matrix-style LED display(s).
Yes, you can charlieplex a huge number of LEDs, BUT, it gets complicated and/or lousy fast. Peggy 1.0 can be built as a charlieplexed display of 25 x 25 LEDs, so we've had some experience with that.
Basically, it means that you're driving only a single LED at a time, instead of a whole row at a time, which means that your display gets very dim, very fast. (You could drive a whole row at a time if you added external driving hardware to provide the current boost required; a single pair of AVR output pins can drive one LED while staying within the ratings of the device. However, adding external tristating hardware requires at least two AVR pins to make a single external tristated outout. And then you start to lose the advantages of charlieplexing anyway....)
Past the dimness issue, there's a refresh rate issue, because it takes a long, long time to scan over all the possible individual LEDs of a big array, and each of them needs to be redrawn (say) 80 times per second. This can sometimes take over the full CPU time, leaving little time for figuring out *what* should be displayed.
Notable exception: if your application only requires one of many LEDs to be on at a time, steadily, then Charlieplexing is *always* a good option.
Windell H. Oskay