As I recall the Mac version of CS4 is 32bit (64 bit was Windows only). So you're getting all the memory that 32 bit Photoshop can see.
Only cure is wait for CS5 and hope that it supports 64 bit.
Assuming the only cure is using PS in 64bit, which is completely false. He's working on a 10mb file. I don't think it's a memory issue.
I work on multiple layer P65 files all the time with my "32bit" OS, no problems.
Question to the OP, how much free space is on your hard drive? This sounds like something you might see if the operating system doesn't have enough disk space for virtual memory. This is especially true if you only have 1 hard drive, and so Photoshop is also trying to claim hard drive space for it's scratch disk.
You probably need around 30gb's of free hard drive space.
Also it sounds like you are trying to enter text ... perhaps the font file is corrupted? You have tried other fonts and same problem?
Just some thoughts.