Could not initialize photoshop because photoshop cannot create any more windows

I’m getting the error message when trying to launch photoshop, it says:

“could not initialize photoshop because photoshop cannot create any more windows”

I am running Windows XP, Photoshop 7.0

My computer is an Intel P2.0GHZ, 1GB ram, and over 80GB of free HD space. I just installed a new 128MB Geforce FX 5700 video card thinking that was the problem, but it still doesn’t work.

The only programs I have running are Macromedia Flash, and a few browser windows.

Here is a screenshot:
http://www.digiphotohost.com/gallery/index.php?album=computerproblems&image=photoshop_bug.jpg&

Also sometimes if I have a bunch of programs opened, I will try to load a new program, and will get an error sound, then nothing happens, no message or anything. If i try right clicking the desktop no menu comes up, it just gets stuck. If i close out a bunch of the programs it starts working again. I dobut i’m out of ram, and there’s loads of space for virtual memory. It’s gotta be a setting somewhere. Any Ideas?