Is it bad to overuse the words 'that' and 'which', and how can you avoid doing so?

Some markers do have a problem with these words and will tell you to use them less often. I can't guess what the threshold is your marker uses, but I can tell you how to get the count down a little:

• look for uses as intensifiers ("not that bad", for example) and swap out for a different one ("not so bad", "not too bad", etc)
• look for places "that" can simply be omitted ("I thought that it would be more" can just be "I thought it would be more", and so on)
• look for places you can substitute "this" or "that" with another way of clarifying the thing you're referring to. ("The problem with that method is..." can become "The problem with the averaging method is..." for example.) Generally doing this will make your writing more precise and not force people to look back to see what you are referring to.
• look for places you can remove both that/which and an excess use of "be" and "is" verbs. The classic sentence pair for that/which is "he went through the door that was open" [implies there are two doors and he chose the open one] and "he went through the door, which was open" [implies there is only one door and you're providing extra information about it.] Both sentences can be replaced with "he went through the open door." If you have a lot of "which was [adjective]" and "that was [adjective]" think about moving the adjective before the noun it describes and getting rid of both a that/which and an is/was.

You should find that these changes improve your writing. It's surprising how relatively mechanical edits like "try not to use is/was" or "try to have as few "ofs" as possible" do produce stronger sentences. If your attempts to reduce your that/which count are making your sentences convoluted and hard to understand, don't do it. It's my belief you can make your sentences better this way.

Doesn't sound as bad as some as my papers, but if you're really worried just ctrl(or command)+f for your repeated words and try to switch them out with other words of the same meaning. Since you have 32 pages and 78 thats, it's only 2-3 thats per page which isn't all that bad. But if you have a section where there's a bunch of thats close together, then you need to fix that. Overall I think this is perfectly fine for a 32 page report(I would've thought it would be more) but if there's a clump you need to fix it.

If you want to play it safe, since this seems like a school assignment, ask your teacher if you're using that and which too often and if you need to change it. I wouldn't worry to much unless they're all bunched together but you should be fine.