Please provide SQL Server version and SP level for better support. I have seen that while working with VERY large BLOBs in pre SP1 servers (didn't try in SP2 and SP3). The problem is in you CLR integration sandbox while trying to allocate space for a VERY large array (i.e. Stream.Buffer). SQLCompress.NET solves that problem by streaming data out of the BLOB into another SQLBytes which uses tempdb instead of memory. If the problem persists and you really want compression on your database you could dowload SQLCompress.NET (which works with SQL 2008 as well) for that.