for example, the most straightforward kind of project would have DV type 1 avi clips on the timeline, captured from a MiniDV camcorder.
When creating a DVD compatible mpeg2 file from the project, VS would have to transcode all the clips - which on your system might occur at around real time or better, depending on how much you have in the way of filters and effects.
Your system info shows you have 1Mb of RAM - I presume that's a typo. If you have 1Gb, it should be fine, but these days with RAM so cheap there's no reason for you not to have 2Gb.
Another type of project might have mpeg2 clips on the timeline - for example, footage captured from a hard drive camcorder. If the output properties are correctly set so as to maintain the properties of the original video, VS will be able to smart render an output file at very much less than the running time of the project.
As Jeff and Trevor have already suggested, the most likely cause of your trouble is a corrupted project, since you were previously able to work with it and it's the only project that's affected.
If you were having problems with other projects, I might suggest you check your
DirectX version, since some windows updates appear to cause problems. There would be no harm in making sure you have the latest version of DirectX anyway, and installing the August 2008 update.
http://www.microsoft.com/downloads/deta ... laylang=en
Other common causes of problems are mp3 audio files. VS doesn't get on with some of those, possibly depending on what encoder was used to make the mp3's.
Unless you've recently added clips or audio files to your project, however, it may just be that the project file is corrupted.
Depending on how many clips make up the project, one way to check it out would be to separately try to output each clip - or to save time, part of each clip - to a DVD compatible mpeg-2 file. If your project comprises many short clips, you could do the tests with groups of clips.
If all the clips check out OK, you should look at any audio tracks you might have, and test the effect of removing each or all of them on your ability to output the project to an mpeg2 file.
You can do all these tests fairly easily, maybe even making a renamed copy of your original project for testing purposes so that you don't have to worry about messing up the original, although VS has a useful "undo" function.
In order to reduce memory usage, you might reduce the number of "undo" levels to 10 or so. You'll find the setting in
file > preferences.
Also try running Windows
Task Manager in the
Performance tab, so that you can see what's happening with your cpu usage and RAM availability when the problem occurs.