I also had this problem of unknown error, unable to save illustration and not enough memory. I am running Illustrator CS2 on windows xp (pentium 4, 3.40 ghz with 1gb of RAM). I also run Photoshop CS2 and Indesign CS2. I have not had any issues with any other program except Illustrator.

I also tried many of the forum suggestions such as disabling version cue, deleting preference files, settings, unchecking pdf compatibility, rolling back Windows Media Player 11 and even re installing Illustrator CS2. None of those worked for me until a fellow designer suggested that the folder size where my files were stored was too big. I am currently on a network with 40 other users with over 1 terabyte of storage space on the server. Hard disk space should not have been an issue. Anyway, the folder my files occupied was over 60 gigs. I backed up to disk about 40 gigs and now I have no errors with Illustrator at all. I'm not sure if the hard disk space on a home computer would act the same as a network server but it would be worth a shot cleaning up some of that hard disk space.

Brian