Dear Ed,
Given the "Error: (7) Out of Memory" message, I'd use regedit to look at the registry key:
HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\Session Manager\SubSystems
and its subkey Windows
(which is long and will end with ... in the display)
on a computer that fails and see if it differs from the same key on a computer that works.
It should include the phrase "Windows SharedSection=1024,20480,768" somewhere in the middle.
Double-click on the "Windows" subkey and arrow left and right to view it.
If you see lower numbers, you may have found your problem.
If not, you've only wasted a minute or two ruling that out.
***
About the middle of this page are detailed directions to find, view. and fix the key:
http://www.windowsanswers.net/articles/fix-error7-manualCheers,
Carl Fogel