Im receiving a Memory Allocation Error and Houdini crashes. Im not really doing anything extreme. Doing a Partible fluid sim, thats no more than 50 frames. Its just a basic sphere colliding with the ground. I have 4 gigs of ram. I would expect that to be more than enough to get the job done. Does anyone know a setting I can adjust to optimize the memory usage to avoid the problem. I dont have anything else in the background running.

Are you running a 32b version of Vista or Windows 7? 64b is highly recommended for fluids in particular due to memory fragmentation issues with the later Windows OSes. WinXP doesn't suffer from this problem as much.

Yes I am running a 32 bit version. I am planning on upgrading to 64 soon. Until then, Is there a setting that could dampen the problem. Im even noticing that when Im just moving the camera around and not even animating, I still get this problem.

I don't really know about the subject in-depth, but you could try reducing the cache of your DOP sims (Windows->Cache Manager) from 500MB to 100MB, and see if that helps the situation. Note that each new DOPnet creates its own cache, so if you don't have any DOPnets, you won't see any in the Cache Manager's list.