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These error messages usually come up when you are using high resolution photos or some highly compressed video formats, especially in large projects or with a lot of media in the project Media Bin. Can you tell us what your source media is?
Regarding photos, it is best to resize them before bringing them into Premiere Elements, resize them to 1000x750. NTSC frame size is 720x480, so 1000x750 gives you room to do some pan and zooming on the photos. Premiere Elements (and PPro) memory management is not the best in the world and large photos "gobble" your memory resources.
Highly compressed video formats also give similar problems, especially MPEG4, XVID and DIVX formats. You may need to convert to DV-AVI which is handled without issue by Premiere Elements.
it's a mod file.. would this be correct??
also, what is the best way to convert to dv-avi?
Yes, it is common for MOD files to give these sort of errors with Premiere Elements. Your best bet is to convert to DV-AVI. See this FAQ on converting to DV-AVI. MPEG_Streamclip converts MOD files to DV-AVI which are fully compatible with Premiere Elements. If you have any problems using MPEG_Streamclip post back and we should be able to help.
Thank you very much for your help