Running low on system memory (PE8)

Hi all
I recently started getting the "Premiere Elements is running low on system memory, please save your work and proceed with caution" message in PE8. I have read tons of topics and websites about the problem and tried every solution that was described in them. I'm not really expecting a solution, only some sympathy
What I'm doing:
I'm from Belgium in Europe and I did a month long trip on Route 66 last year, together with a friend. Now I'm in the middle of making a road movie out of our footage. The clips were shot with a Samsung camcorder using the MP4 container. GSpot tells me it's using an avc1 H.264/MPEG-4 AVC codec.
I started using these files without thinking, even though 1 minute of footage is approximately 100 MB large. That worked quite okay, but now I'm about 25 minutes into my montage and I'm getting an increased number of the "running low on system memory" message, at the point where they pop up after about a minute's work.
What I tried:
Then I converted all the used video files using WinFF, into MP4 files with more compression, making the files about six times smaller in size. Now, when I open up PE8 and the interface is loaded, I immediately get the "running low on system memory" message, probably because PE8 is conforming the clips again. Because that didn't work, I put the original files back in place, but as expected that gave the same result. Now PE8 crashed when I try to do anything.
Before I start working, I make sure all other programs and their corresponding processes are shut down, so the computer has little else to do than keep me from being frustrated
My system:
I'm running PE8 under Windows 7 Ultimate. I have an AMD Phenom 8600B triple core processor with 3 GB of RAM and one hard drive, divided into two partitions with 135 GB free on the disk where my movie clips and project file are. I moved the scratch disks in PE8 to an external hard drive that's connected through USB 3.0. I upped my virtual memory, the paging file is now 7070 MB large, with the custom size set initially to 4000 MB and a max size of 6000 MB.
Last words:
I'm guessing PE8 is now crashing because it has too much to do reconforming all video and that I probably will be fine if I convert the clips first, and then start using them in PE. I will do that for the rest of my movie but I don't want to redo those first 25 minutes, because they almost literally cost me blood, sweat and tears.
What I want:
A listening ear, a pat on the back and maybe the one solution that hasn't been uttered anywhere on the internet yet and somehow manages to rid me of all frustration

Neale,
There is a green-screen video (video2) with a still picture background (as video1) that runs through the entire video.  The still is 720 px high by 800 px wide.
Again, creating the mpeg in for DVD widescreen, no problem.  FLV web medium, no problem.  FLV web large - memory problems.  When creating FLV web large, RAM usage never goes above 6½ to 7 GB.  No other apps running, anti-virus shut down. 
Maybe PE9 can't use all 24 GB?  As a 32-bit app, I guess it can't. 
Photoshop works well, at least.
ABC

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    901001 <2>Dec 11 15:42:20 kernel: System running low on direct mapped memory    
    901001 <2>Dec 11 15:42:20 kernel: Please issue 'show processes memory' and 'show system kmem' to diagnose further
    901001 <2>Dec 11 15:42:21 kernel: Available CP memory reached below 5 percent threshold, TotalMemFree: 312201216 bytes, High MemFree: 305004544 bytes
    Kindly suggest why this error message is generatting and it will effect the box performance.
    SoftWare version : A4(2.0)

    Hi Ranjith,
    It does seem to be  the DDTS you are hitting. Please discuss with your account team and upgrade for the fix.
    You may also be interested in related DDTS: Both of the below DDTS are related.  Reload of the device fixes the issue but only for a while. You may have to reload when you see this message again and available memory is below 15%.
    CSCtx41399
    CSCtz29117
    Regards,
    Kanwal

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