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Thanks Nxlimit I'm glad to have helped. I do think Its a bug also. However at the time, I was doing an illustration for a cover that was supposed to be 8-in x10-in funny enough, when I finished working on it over in Photoshop. I realized that it was actually 32-in x 30-in or something like that 
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from what I can tell when saving a PSD from Illustrator it starts at the very outer edge of the master artboard and sometimes gets tripped up and tries to save a file larger then the actual artboard you're working on...files that normally didn't save before have a better chance of saving if I used the "use artboards" checkbox in the first export dialog box, then choose the artboard number or all if it's just 1. The Anti-aliasing uses a higher memory requirement for the PSD export so the upper limit gets reached faster, but try to force the artboard to export option and see if that helps 
Ha! I've been experiencing this problem for so long and have tried so many solutions. FINALLY! Viking....I always missed the "use artboards" checkbox! I tried un-checking anti-aliasing, copying and pasting as smart objects into PS (which is not fun when it's complex), increasing my virtual memory, changing my scratch disks, etc. and it turns out AI has just always been trying to export huge artboards! Thank you sooo much. You have no idea!
No idea why it's so memory hungry, I was hoping CS5 would do the trick but it does the same thing as CS4. The only work around (total PIA but it works) is to save each layer as an EPS file and bring them into Photoshop at 300DPI or whatever resolution I need...bringing it in (almost always) respects the transparency but also crops to the extents of the objects of that layer which is usually smaller then the artboard so I create a layer (usually bottom at the bottom) that has an empty box with a 1 point stroke line the size of the artboard. Because I keep this layer always on and the eps files respect transparency I can then drag them over to a single photoshop file and line up a corner (if needed) to keep everything in place. Then marque the outer line and delete it from all layers (you can keep if you like). LIke I said a PIA but it does work for the ones I need at 300+DPI. Of corse if you don't need layers a single EPS file works too 
There is probably a trick to have Photoshop use the entire artboard instead of cropping but the line thing works and isn't that big a deal on my end
Saving a PDF is a good solution; however, it doesn't include layers so you'll have a flat file much like rasterising an EPS file.
(I might be missing something with the import options though so if anyone knows how to import a layered PDF let me know)
carny_'s copy and paste solution is also a great workaround that seems to be working (although tedious with lots of layers )
with the only caveats being everything should be constrained to the working artboard and centered...when you paste in
Photoshop it wants to center that paste on the current document so if you have some asymmetrically balanced objects
(like objects in one corner) or something larger then the artboard but again unbalanced (hanging off one side) those layers
may not be in position in photoshop. A workaround is to include a "crop box" layer...a bottom most layer with just a stroked
box (no fill color) that is large enough to encompass your entire image...just have to remember to select that box with
every copy/paste . It does work though and worth the trouble for files too "large" to export normally...my biggest file
tested so far was a 15"x15" piece.
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