I have a similar but slightly different problem.

I have a large flash project which compiles ok in Flash CS5.5 as long as I change the -Xmx128m to -Xmx300m

I I try and compile it in Flash CS6 then any value for Xmx over 178 causes the "Error initializing Java Runtime environment. You may need to reinstall Flash". The project won't compile.

I'm running Windows XP with 4GB of memory.

My guess is that Flash has a fixed amount of memory that it is allowed to use for the program, your fla file and the compiling process. This amount is fixed regardless of the computer's memory.

CS6 is a larger program than CS5.5 so leaves less for the the fla file and compiler. Hence, large files which compiled on CS5.5 won't compile on CS6

Any solutions would be very wellcome.

I can't see how this makes ANY sence but I just moved files associated with my test project away from my [USER] home directory to a different folder and the error disappeared. I've been messing around with this for a few hours but I don't believe I changed anything which could have affected it.

Really, Really weird but happy that it works!

I am seeing the same problem with any size file. A completely empty AS3 document will compile and run, but if I add even one space to the timeline actionscript I get the JVM out of memory error!

I just installed CS6 and had the same problem.  My solution is quite simple.  After I encoutered the problem, I re-installed java as administrator by clicking the installer.  But I doubt that is necessary. 

Then I ran Flash CS6 as the administrator by right clicking the shortcut.  That worked. 

So I have set up the shortcut to run as the administrator.

I'm having this same issue. Running Flash Pro CS6 on a Win7 64-bit OS, 8gb of RAM and an SSD hard drive. Especially given Tatanium's 32gb of RAM, I think we can clearly eliminate "tech specs" from the reasons causing this.

If I had to guess it might be some directory reading issue, since moving to a new folder often clears up the problem. This is a really hacky solution though, and only works sporadically. Plus it's a huge pain to have to move the source .fla every time I want to compile.

Specifically, I'm having my problem exporting a .swc containing a whole bunch of .wav files. It exports to about 30mb, so not wildly huge but decent enough.

UPDATE/FIX: I changed -Xmx128m to -Xmx256m in jvm.ini and it seems to have worked for me, after restarting Flash. Read above that it didn't work so I didn't try it earlier, I guess it's very machine-specific. My issue is solved for the time being, but this still seems to be a bit of a problem - good luck to everyone else/Adobe!