Adobe Premiere CS3 Memory Problems --- Please Help !

Hey every1 --- desperate need of some guidance here. I've been all over the internet and these boards --- have seen this come up with a lot of people but no real solid answers that I'd seen or that have helped.

First off, my comp is an imac 3.06 Ghz Core 2 Duo, 4GB memory. (just bought the computer last year)

I'm shooting with a canon 7d in HD (1920 x 1080p) and I'm editing using Premiere CS3. I've noticed that editing has become very difficult since I started using HD; playback is very choppy and the 'quality settings' in the preview monitor are a joke and do absolutely nothing whether it's on draft or automatic.

Anyway, despite the choppiness and slow editing, I was able to get a 3 min clip completed. These are my export settings:

Export > Movie

H.264

960 x 540

23.976 fps

Square pixels,

100% quality,

recompress: unchecked.

Once exported (I was able to export smaller timelines previously--- say, 50 secs of footage or so) the files look AMAZING and from there I use them for online video via vimeo -- stuff looks really awesome.

Anyway, recently I'm getting: 'Error compiling movie. Out of Memory. Change optimization preferences to memory', etc. etc. Well, I did as it asked and that did absolutely nothing.

So, I decided to open up my activity monitor and watch what's going on with my memory while premiere is exporting. I also closed ALL unused applications. System runs at about 2.16gb free memory before I start exporting. Memory seems stable during export UNTIL around the 50% exporting mark, and then its starts climbing like crazy and my memory just gets eaten up --- finally resulting in a crash at about 70% render.

I really don't know what else to do. Does my computer not have the power to export 3 min of HD footage??? This seems surprising to me ... I don't know what else to try.

Was thinking about upgrading my mac from 4gig to 8gig --- but I don't want to spend the cash if it's not going to fix the issue!

Thanks for any help !!!

-Mark