The first thing that I would look into would be the amount of free, defragmented space that you have on your HDD's. It sounds like this might have gotten filled up and cannot process your request.
Next, I'd look at this ARTICLE for tips on setting up your computer and getting it ready for an editing session.
Then, I'd supply a lot more information. This ARTICLE will give you tips on what sort of info would be necessary.
Also, please tell us what kind of camcorder your video came from and how you got it into your computer?
If you are using photos as your source files, have you ensured that they are sized to 1000x750 pixels?
The system I'm running on is a Dell with a Pentium dual core T2390 1.86Ghz with about 1.6GB DDR2 SDRAM (I think thats the RAM), Vista OS. I don't think the space on the hard drive has caused the problem its barely half full and is purged regularly. With regards to the files I use, they are all Photoshop .PDS files as I use Premiere to compile animation work which I know is not it primary function and does require a great deal of space and power. I also use the .avi files from using the export movie option when selecting file, there is no problem with this. I don't use any files from a camcorder as mine is never recognized (this however is a separate problem that I don't feel needs resolving). As I said before problems only arise when using the share tab. All options in the tab when selected and the command given cause the program to crash the is no descriptive error message just an I'm sorry Premiere elements has stopped working please wait whilst windows collects information on this (nothing becomes of this though). As also mentioned the DVD burn capabilities and full film exports in the share tab were working fine until recently and with no change in programs or system operations on my computer. It simply just stopped working. With regards to picture size there is variation but none of them exceed 1000x750 and I have been able to complete there other animation projects working like this, and burn them to DVD with no problems until now.
You say that the HDD is only half-full. What is its size to begin with? A 60GB HDD, that is only half-full might not have enough defragmented free space on it for a larger Project.
Also, what did looking at MSCONFIG show for your loaded programs and Processes? Task Manager can also give you a clue as to what is loaded and running, when you go to edit.
The basic specs. for your system are near the bottom, but should still work, so long as everything is optimized and the Project not too long.
This ARTICLE will give you some tips on finding clues as to what is happening, when the program crashes or hangs. There will also usually be a "breadcrumb trail" left behind, when things quit, or crash. Event Viewer will help you locate the causes.
Good luck, and glad that your images are resized outside of PrE.