My guess is that your source video files are at the core of all of your problems.
AVIs are not all the same. DV-AVIs are the ideal format for editing on a home computer, and these are the files that come from miniDV, tape-based camcorders.
Other video formats -- like video from still camera -- can use any of a number of codecs, most of which cause the very symptoms you describe. A good indication is a red line that runs along the top of the timeline as you add these files to your video project.
Where did these AVIs come from?
WellI solved the issues.
It seems that Adobe just issues that the memory is running low, but its fine.
And for the avi issues, I use G-Spot, that how I know I have the codec, it appears that the Vegas Trial created additional sound files in the directory, so when I loaded all of the files into PE 7 there were spaces with no files there (At Media Import), but apparently it was those additional sound files. Sorry for the false alarm, as I was also looking in the semi wrong place for files.