Can a papal apostolic exhortation contain error, and did Benedict XVI mishandle Matthew 27:25?

First, number 42 is not heresy. Benedict simply recognizes that the Old Testament describes immoral acts, cheating, trickery, violence, massacre, without explicitly denouncing them, and asks for interpretation in historical and literary context with the Gospel as the hermeneutical key; those are general and good statements, and he is not condoning immorality. But you asked whether the magisterium can never propose what is unsafe. As far as dogma is concerned, yes, the Holy Spirit will never lead the Church into dogmatic error. An apostolic exhortation is not dogma, so it can contain things that are off-kilter, and the last several popes have treated things like the excommunication of Lefebvre and the Latin Mass very differently, which is procedural, not dogmatic. And Benedict does have real errors, especially on Matthew 27:25, where the crowd says 'His blood be upon us and our children.' In his Jesus of Nazareth he effectively says that never occurred and Matthew should not have written it, because modern Catholic scholarship holds that only the salvific parts of Scripture are inspired and error-free, not the historical ones. That is a modernist view of inspiration, and I reject it; the whole legacy of the Church is a fundamental, literal reading of Scripture.