I'm not sure how much memory we have on the server.  But, my pc has 2.99 GB of RAM. I noticed that there is a Extender Projects folder.  Do you believe this has something to do with my pc memory issue?  All my server code events are temporarily stored in this folder when I open the project. 

It very well could be your client machine. I am assuming that you are running version 803 of K2 and that fixed a great deal of memory leaks that I know of in the Visual Studio integration. It still happens, just not as often. I have also seen it happen when I have an error in the code and I will get an exception of ' ' error. Then when I try to save it gives the system out of memory. I have just learned to save very often and then restart visual studio. Sometimes I will reboot the machine just to clear out the memory.

From what I have see when it happens on the server side you will get a line stating out of memory in the output after a build.

HTH.

We aren’t running version 0803.  We just got things working with SP1. 

Yes, I save every 10 minutes and I restart VS and reboot my machine.  I believe the only solution now is to upgrade to 0803.   I’m afraid once we upgrade the project with SharePoint integration will not work anymore.

Thanks for your help