Is it SQL throwing the error or IIS? What's the event log say?
2-3GB of memory used is not really that much. if you are using a 32 bit server, then you are approaching the limits of the hardware and memory.
You could cap SQL memory to say 2GB and set it to reserve it but the issue would still exist. You are asking to much of the hardware.
I guess you could also increase the size of your page file but that again is not ideal.
You last sentence confuses me: "Both the web server and IIS server..." Which one has SQL on?
Putting SQL and IIS on the same machine is not ideal.
I can't die, there are too many people who still have to meet me!
It's not a bug, SQL just misunderstood me!