Error attaching files -- out of system resources

[Dan]

When trying to attach a file to an e-mail message (through
drag an drop or insert file), I receive an error dialog
box stating "Out of memory of system resources. Close some
windows or program and try again."

I have more than plenty of free memory.
The error happens even if outlook is the only window
running.
The error also orrurs regardless of the source location of
the file to be attached. (complex location or not)

I am running Outlook 2002 sp1 against an MS exchange
server.
Thanks