What I've done to account for inflation in mine is to make my projected investment returns after inflation, so that all the future amounts are shown in 2012 dollars (soon to be 2013!). It seemed simpler to me to understand it like this.
I've taken the exact opposite approach. I've set up my spreadsheet to measure actual returns, and then projected my expenses to grow with inflation. This way your spreadsheet projections for value and the actual future numbers will match up.
The only down side of this approach for me is that I sometimes forget that a million dollars in twenty years is worth a lot less than a million dollars today. Still, it's an accurate projection of my real future numbers, so as long as I inflate my future expenses without cheating myself by thinking I can spend less in the future, it all works out.