its just a setting in photoshop. an almost instant fix....
Adding memory is not the best fix...
Also, scratch disk must be a full continous space. So if your dirve is fragmented it will show an error.
Also, sometimes scratch disk will be full of junk. You have to delete it all..
Also look here
edit/ preferences /memory and image cache, chang eto a lower number..
Lower this to below 50% usage.
Determining how much scratch disk you need
With changes in Photoshop and its memory management, the formula used in the past (that is, 3-5 times the size of your average image) no longer provides an accurate estimate of how much scratch disk Photoshop needs. In Photoshop CS2, you can use the states in your history palette to help you determine how much scratch disk space you need.
Each history state that includes an operation that affects the entire image (for example, when you apply Gaussian blur or unsharp mask to the entire image) creates a full copy of your image at its original size. If your initial image is 500 KB, and you apply Gaussian blur to it, your image will need 1 MB of scratch space. If your history states consist of operations that affect only part of the image, such as paint strokes, only the size of the tiles touched by the strokes are added to the image size. If you count up the number of histories you have where operations have affected the entire image, and multiply your original image size by that number, you'll have an approximate amount of scratch disk space the image will need. If you have applied levels, a reduce noise filter, and an unsharp mask filter to your entire image that's 5 MB in size, the image will need 20 MB of scratch space.
If you need to reduce your scratch disk overhead to a minimum, you can minimize the number of patterns and brush tips you use in each of your presets, and you can reduce the number of patterns you use in your image's Layer Styles (as applied with the Bevel and Emboss Texture or in the Pattern Overlay). Each small pattern and sampled brush in the presets uses at least one tile for storage. Patterns used in Layer Styles take extra RAM, as well.