Cannot allocate memory for output buffer

I am looking for some help regarding an python OperationalError that I
recently received while executing a python script using sqlalchemy and
psycopg2. The python script parses an xml file stored on a networked
drive and enters the information into a pgsql database. Sometimes
these xml files reference a binary file which is also located on the
networked drive. These files are subsequently read in and stored in a
table along with the file's md5. The binary data is stored within a
bytea column. This script worked pretty well until recently when it
came across a binary file about 258MB in size. While reading the file
off the networked drive I received an OperationalError indicating that
it was unable to allocate memory for the output buffer. My initial
guess was that it ran out of memory, but according to the task manager
the machine had close to 2GB free when the error occurred.

I'm not 100% sure that this is a pgsql problem, but all Google
searches show the exact error message within libpq's source code which
is why I'm starting here.

The machine that runs the script is a Windows XP machine running
Python 2.6, PsycoPG2 2.0.10, and Postgresql 8.4. The database is
running pgsql 8.4 on a FreeBSD 8.0 box with approximately 16GB or
memory. I've been searching on Google and the mailing list archives
for the past couple days trying to find an answer with no success.

Any help is greatly appreciated. Thanks in advance.

--
Pete Erickson
redlamb _at_ redlamb _dot_ net