Without having the information requested by
thebestcpu way back in post #3 its difficult to suggest anything 'specific' to your system.
So far all we know is that you run Windows 7.
It can be deduced from your last screen shot that you are running a 64 bit version of that OS but we still do not know what version of PS / Illustrator you are using nor how much memory you have in your machine.
To answer your latest question, and only as far as PS is concerned....you.
Memory allocation for PS is a 'Preferences' setting.
The default is usually around 70% of your total system memory.....and to be honest I've never had to change it from that.
Before you think this can be changed and cure your 'memory' problem you have to understand that this is just 'allocated' memory....the actual amount PS uses depends entirely on what it is you are doing in PS and the properties of the document....and how many you have open.
Users of PS misunderstand that increasing the 'allocated' amount means PS uses more......not so, it will use what it needs up to the limit set in the preferences.
As a TEMPORARY measure you could shut down everything except PS and set the memory allocation to 95%......see if you can get the memory error again...but be warned this amount may slow down your PC if it only has 5% memory....then again it may be fine if 5% of your memory is 12.8GB.......IF.
Needless to say, remember to set the allocation back to 70% regardless of the outcome.
When PS needs more than this limit it starts to use your hard drive as a form of 'memory'...this is the 'Scratch Disk'. This sounds like a good thing to do but in reality using a 'hard drive' as memory is not the ideal solution....the disk needs to be constantly 'defragmented' in order for it to be of any use and unless you have a dedicated drive for the sole purpose of being a 'scratch disk', frequent defragmenting is just not practical...nor advised.
At this stage I'd suggest leaving everything as it is temporarily.....do whatever causes the memory error again and then check out the memory usage details in the task manager.(Memory (Private Working Set))
(You can change the info displayed in Task Manager via VIEW > SELECT COLUMNS...)
Check this against your installed memory and see if they are close.
I couldn't speak for Illustrator but Photoshop is useless when it comes to memory management. Not only that but it also has a long standing memory 'leak' issue which can cause problems if its open for some time.
One thing that can help reduce this is to turn OFF 'Font Preview' via TYPE > FONT PREVIEW SIZE > NONE
Its not a permanent solution but it may help to establish what is causing your issues.
Its not possible to be any more specific than that without knowing your system specs.
Regards.
MrToM.