For n=32 and newn=31, indices should be a 32x31 matrix; you should not get an "out of memory" error.
For different values of n end newn you may get introuble, since C(n,k) grows pretty fast. For example, for newn=16 you get over 600M combinations (you will need >150GB of memory to hold that matrix).
I tested nextchoose.m and worked pretty well. From your error message it seems that the limit testing on line 79 of nextchoose.m did not capture the end of the cycle, so you got to line 96 with k+1-inc negative.
I suspect you may be changing one or more of the persistent variables of the nested function during your calculation, somehow.