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** Fixed at ArcGIS 8.2 **
This error occurs when running the ZonalStats function at the Grid prompt:
This is a known problem with large input grid datasets.
This is issue has been resolved in ArcGIS Version 8.2.
In previous versions:
Run ZonalStats to calculate only one statistic to save memory space:
Grid: output = zonalstats(zonegrid, griddataset, mean)