Importing Photoshop files into Illustrator CS3

I'm running into a problem in Illustrator CS3 when I try and import a native CS3 Photoshop file. If I try and place the file as a linked file I get an application error stating that there was insufficient virtual memory. And, if I select cancel I get a run time error and Illustrator crashes.
If I try and embed the file I get the same results. It doesn't seem to matter what the file size is and .tif's work just fine up to huge sizes 100Mb+.
As to the system I'm running Windows Vista Ultimate (x64) 8Gb of ram, two SCSI drives with virtual ram assigned to both so memory issues, well, shouldn't be issues.
Anyone got any ideas?

Ok, so ADOBE needs to get up off their a$$e$ and address this problem, However some of you guys make it sound like its the end of the world... Here's a way to go around it in the meantime- at least this is how my PC is reacting (you might not be as lucky, but worth a try)
After getting my "insufficient virtual memory" error, try closing Illustrator down and then open the file from the OS window (not from within illustrator or browse)by double-clicking the file you'll automatically open Illustrator,it might take a couple of tries but after my second attempt it opened my file (took a little long) and I got a different error message "there was an error with the embeded file what do you want to do - replace file, correct file, ignore file, cancel" (msg not verbatim but close - not at my comp right now)
Then just ignore the files delete the links (they'll show up as blank boxes) If your just using those embedded psd's for previewing purposes you'll just have to save a flattened tiff everytime you make a change and keep saving over that same tiff so illustrator will automatically update it to you illustrator file.
sorry for the long post, but hopefully it helps ease the pain!
-salvador

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