MSMQ has a disk based message store (Memory Mapped files I believe).
Try moving it to a larger disk.  Your "Insufficient Memory" problem
should go away provided you do not continue to exceed the capacity of
the disk.
Incidentally, how much physical memory does the machine have that hosts
the queue?

[Saravana, S] - I ran it in a high end dell server , 1GB RAM and 40 GB
hard disk

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