This error occurs due to system setting added with Dynamics CRM 2011 Update Rollup 10 named Quick Find optimizations.
By default, these are enabled after applying UR10; however, you can disable them using the option in System Settings:
Settings –> Administration –> System Settings –> General Tab
The setting is at the bottom of the “General” tab called “Enable Quick Find Record Limits,” which is set to “Yes” by default.
When the optimizations are enabled, if more than 10,000 records are returned by a Quick Find query, the following error will occur: “Quick find limit exceeded. Please use a more selective search value, or use Advanced Find for your search.”
If users need to search using terms that will potentially match over 10,000 records, this setting can be disabled. However, disabling the setting may result in slower overall performance for Quick Find queries. A more appropriate tool for such queries would be to use Advanced Find.