Video Editing Help

Hi, I have been editing video off and on for quite some time, but never have I encountered this problem and I wanted to see if anyone could help me.  I got a new camcorder, it records everything in HD 720x1260p .avi files.  Before this I was using standard DV tapes and capturing them via Adobe Premier.  I am using Adobe Premier Pro 2.0 and have also tried Adobe Premier Elements 3.0 and 4.0.   For a little background on my computer, I am currently running the following:

AMD Athlon 64 X2 Dual Core Processor 4200+ 2.20 GHz, 2.00 GB RAM. on Microsoft Windows XP Professional Version 2002 Service Pack 2.  My main hard drive is 300 GB but because my alternate hard drive just crashed, I am forced to have only 10.1 GB remaining on my hard drive (after uploading all of the footage that I need).  I am allocating 8000mb for virtual memory on this hard drive.  I have made all of the computer settings to performance rather than visual, and I have closed all programs that are not being used in the task manager.

Here is my problem.  I am able to edit videos fine, but once I load more than about 10 30 second clips into the editor, or if I start to edit more than 30 seconds worth of video, premier notifies me that it "is running very low on system memory.  Please save your project and proceed with caution".  Once this message has appeared I am lucky if I am able to load any more video into premier.  I am also lucky if the program doesn't shut down automatically.  Usually if I try to load video into premier after this message has appeared then I will receieve a notification that the file type is corrupt, although it is not.  I can easily open the same file into a clean project on premier later, which is how I know that the file type is fine.  This is becoming quite frustrating and I am wondering if any of you have any tips on how to solve this problem.