Please open your debug.err file in notepad, and link the contents into a post here via pastebin. This will give us some technical information that can help troubleshoot your problem.

The file can be found in My Documents\My Games\Elemental

Be sure to copy the debug immediately after the error occurs; if you start the game again, the debug log will be erased and recreated for the new session.

If there was a dump zip created in C:\ProgramData\Stardock\Elemental - War of Magic (C:\Documents and Settings\All Users\Application Data\Stardock\Elemental - War of Magic on Windows XP), please post it via drop.io.

Looks like an OOM, yep.

I'll also throw in, very similar computer specs, all the way to the video card and Vista 64. 

I'll attach the debug file and the zip here in a sec as well.

http://pastebin.ca/1946767

http://drop.io/j5r1upe

Here's the autosave file that I start from each time to recreate the below

http://drop.io/tlcxgo7

I can recreate this error (tried now 7 times in a row )

If I move the group that the games starts with as selected, NW up the road towards the other NPC, and then cast Imbue spell from the one group to the single npc, it errors out every time.