Take a look at the related question How many lines of code is too many?. There are quite a few tidbits of wisdom throughout the answers there.
To repost a quote (although I'll attempt to comment on it a little more here)... A while back, I read this passage from Ovid's journal:
I recently wrote some code for
Class::Sniff which would detect "long
methods" and report them as a code
smell. I even wrote a blog post about
how I did this (quelle surprise, eh?).
That's when Ben Tilly asked an
embarrassingly obvious question: how
do I know that long methods are a code
smell?
I threw out the usual justifications,
but he wouldn't let up. He wanted
information and he cited the excellent
book Code Complete as a
counter-argument. I got down my copy
of this book and started reading "How
Long Should A Routine Be" (page 175,
second edition). The author, Steve
McConnell, argues that routines should
not be longer than 200 lines. Holy
crud! That's waaaaaay to long. If a
routine is longer than about 20 or 30
lines, I reckon it's time to break it
up.
Regrettably, McConnell has the cheek
to cite six separate studies, all of
which found that longer routines were
not only not correlated with a greater
defect rate, but were also often
cheaper to develop and easier to
comprehend. As a result, the latest
version of Class::Sniff on github now
documents that longer routines may not
be a code smell after all. Ben was
right. I was wrong.
(The rest of the post, on TDD, is worth reading as well.)
Coming from the "shorter methods are better" camp, this gave me a lot to think about.
Previously my large methods were generally limited to "I need inlining here, and the compiler is being uncooperative", or "for one reason or another the giant switch block really does run faster than the dispatch table", or "this stuff is only called exactly in sequence and I really really don't want function call overhead here". All relatively rare cases.
In your situation, though, I'd have a large bias toward not touching things: refactoring carries some inherent risk, and it may currently outweigh the reward. (Disclaimer: I'm slightly paranoid; I'm usually the guy who ends up fixing the crashes.)
Consider spending your efforts on tests, asserts, or documentation that can strengthen the existing code and tilt the risk/reward scale before any attempt to refactor: invariant checks, bound function analysis, and pre/postcondition tests; any other useful concepts from DBC; maybe even a parallel implementation in another language (maybe something message oriented like Erlang would give you a better perspective, given your code sample) or even some sort of formal logical representation of the spec you're trying to follow if you have some time to burn.
Any of these kinds of efforts generally have a few results, even if you don't get to refactor the code: you learn something, you increase your (and your organization's) understanding of and ability to use the code and specifications, you might find a few holes that really do need to be filled now, and you become more confident in your ability to make a change with less chance of disastrous consequences.
As you gain a better understanding of the problem domain, you may find that there are different ways to refactor you hadn't thought of previously.
This isn't to say "thou shalt have a full-coverage test suite, and DBC asserts, and a formal logical spec". It's just that you are in a typically imperfect situation, and diversifying a bit -- looking for novel ways to approach the problems you find (maintainability? fuzzy spec? ease of learning the system?) -- may give you a small bit of forward progress and some increased confidence, after which you can take larger steps.
So think less from the "too many lines is a problem" perspective and more from the "this might be a code smell, what problems is it going to cause for us, and is there anything easy and/or rewarding we can do about it?"
Leaving it cooking on the backburner for a bit -- coming back and revisiting it as time and coincidence allows (e.g. "I'm working near the code today, maybe I'll wander over and see if I can't document the assumptions a bit better...") may produce good results. Then again, getting royally ticked off and deciding something must be done about the situation is also effective.
Have I managed to be wishy-washy enough here? My point, I think, is that the code smells, the patterns/antipatterns, the best practices, etc -- they're there to serve you. Experiment to get used to them, and then take what makes sense for your current situation, and leave the rest.