Windows XP-> SP2

I don't think it's directly related to SP2, but rather that PJ64 just doesn't like some configurations (which in your case was introduced with SP2).

Check out this thread for a little but more info, but hardly any solution:
http://www.emutalk.net/showthread.php?t=9372&highlight=memory+allocation+error

Perhaps someone else has an answer...

i've got the SP2 and does'nt have this error.. O.O