bzr update crashes on large update (Windows warned of low virtual memory)

I have been using bzr to version control an installer package. The installer package contains copies of the source binaries and is pretty large. Up until now everything has been OK (13 revisions). I committed the changes on one machine successfully, but when I went to update another machine (which is a virtual machine running XP SP3 with 1GB of memory) the bzr update failed and produced the following stack trace.

Both the central server (Ubuntu Linux) and the clients (Windows XP SP3) run bzr version 1.10.

We use BZR+SSH as the transport together with putty/pageant for the key handling.

C:\nms\install\.bzr\branch>type branch.conf
bound_location = bzr+ssh://<uername>@<machine>///home/bzr/gnms/install/trunk/
bound = True

Any ideas?

Memory leak?

Here's the stack trace.

C:\nms\install\2_open_source>bzr update
Connected (version 2.0, client OpenSSH_4.6p1)
Authentication (publickey) successful!
Secsh channel 1 opened.
Unknown exception:
Traceback (most recent call last):
  File "paramiko\transport.pyo", line 1518, in run
  File "paramiko\channel.pyo", line 944, in _feed
  File "paramiko\buffered_pipe.pyo", line 78, in feed
MemoryError

bzr: ERROR: exceptions.MemoryError:

Traceback (most recent call last):
  File "bzrlib\commands.pyo", line 893, in run_bzr_catch_errors
  File "bzrlib\commands.pyo", line 839, in run_bzr
  File "bzrlib\commands.pyo", line 539, in run_argv_aliases
  File "bzrlib\builtins.pyo", line 1148, in run
  File "bzrlib\workingtree.pyo", line 2140, in update
  File "bzrlib\decorators.pyo", line 192, in write_locked
  File "bzrlib\branch.pyo", line 2046, in update
  File "bzrlib\decorators.pyo", line 192, in write_locked
  File "bzrlib\branch.pyo", line 1957, in pull
  File "bzrlib\decorators.pyo", line 192, in write_locked
  File "bzrlib\branch.pyo", line 1757, in pull
  File "bzrlib\decorators.pyo", line 192, in write_locked
  File "bzrlib\branch.pyo", line 524, in update_revisions
  File "bzrlib\decorators.pyo", line 192, in write_locked
  File "bzrlib\branch.pyo", line 286, in fetch
  File "bzrlib\repository.pyo", line 1021, in fetch
  File "bzrlib\repository.pyo", line 3182, in fetch
  File "bzrlib\decorators.pyo", line 192, in write_locked
  File "bzrlib\repository.pyo", line 2880, in fetch
  File "bzrlib\repository.pyo", line 2887, in _pack
  File "bzrlib\repofmt\pack_repo.pyo", line 647, in pack
  File "bzrlib\repofmt\pack_repo.pyo", line 801, in _create_pack_from_packs
  File "bzrlib\repofmt\pack_repo.pyo", line 778, in _copy_text_texts
  File "bzrlib\repofmt\pack_repo.pyo", line 887, in _copy_nodes_graph
  File "bzrlib\repofmt\pack_repo.pyo", line 911, in _do_copy_nodes_graph
  File "bzrlib\pack.pyo", line 272, in _iter_records
  File "bzrlib\pack.pyo", line 277, in _iter_record_objects
  File "bzrlib\pack.pyo", line 218, in reader_func
  File "bzrlib\pack.pyo", line 177, in read
  File "bzrlib\pack.pyo", line 172, in _next
  File "bzrlib\transport\remote.pyo", line 370, in _readv
  File "bzrlib\transport\remote.pyo", line 377, in _handle_response
  File "bzrlib\smart\message.pyo", line 280, in read_body_bytes
  File "bzrlib\smart\message.pyo", line 228, in _wait_for_response_end
  File "bzrlib\smart\message.pyo", line 237, in _read_more
  File "bzrlib\smart\medium.pyo", line 444, in read_bytes
  File "bzrlib\smart\medium.pyo", line 456, in _read_bytes
  File "bzrlib\smart\medium.pyo", line 148, in read_bytes
  File "bzrlib\smart\medium.pyo", line 765, in _read_bytes
  File "paramiko\file.pyo", line 158, in read
MemoryError

bzr 1.10 on python 2.5.2 (win32)
arguments: ['bzr', 'update']
encoding: 'cp1252', fsenc: 'mbcs', lang: None
plugins:
  bzrtools C:\Program Files\Bazaar\plugins\bzrtools [1.10]
  launchpad C:\Program Files\Bazaar\plugins\launchpad [unknown]
  qbzr C:\Program Files\Bazaar\plugins\qbzr [0.9.5]
  svn C:\Program Files\Bazaar\plugins\svn [0.4.16]
*** Bazaar has encountered an internal error.
    Please report a bug at https://bugs.launchpad.net/bzr/+filebug
    including this traceback, and a description of what you
    were doing when the error occurred.

C:\nms\install\2_open_source>

C:\nms\install\2_open_source>bzr --version
Bazaar (bzr) 1.10
  Python interpreter: C:\Program Files\Bazaar\python25.dll 2.5.2
  Python standard library: C:\Program Files\Bazaar\lib\library.zip
  bzrlib: C:\Program Files\Bazaar\lib\library.zip\bzrlib
  Bazaar configuration: C:\Documents and Settings\Administrator\Application Data\bazaar\2.0
  Bazaar log file: C:\Documents and Settings\Administrator\My Documents\.bzr.log

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