I was having all sorts of memory issues when running 2010 Flow on my 32 bit elitebook HP Laptop. I got a 64-bit desktop and have not had any issues since.
32 bit XP OS will only access 3GB of RAM, which is far too little to run a fair sized Flow Sim model. You need a 64 bit system with at least 8GB of RAM.
I recently switched to a 64bit system due to the same error you encountered. 200,000 cells is a lot for a 32bit system, and I'm sure thats why you do not have enough memory.
I would suggest shrinking the computational domain, or using the check geometry to see why your mesh is so large. There may be a small gap in the model that is making your mesh extremely small.