Venky Subramaniam (8/26/2010)
The server has 32 GB RAM, 8 CPUs, and SQL Server has been configured to utilize as much as possible
That's most likely your issue. There is not enough room outside of the cache to store all the rows. You need to leave some space for the OS to breathe. Also keep in mind having a logged in session + SSMS open requires a few hundred megs before you even run a query.