This is the -a flag (set the fast ram allocation flag)? Removing that bit should help, or most likely will not make a difference? (I will try it when I get home, along with GCC 4.4.0).
I'm not sure, what "-a" ? When you take a look at Mxalloc() parameters, there's one where you set if it's ST/TT RAM. And in this mode you can specify bit #3 as "use mint memory model".
I do know the out of memory is happening in a calloc call, which I am guessing (and I could be totally wrong) is being converted to a mxalloc in TOS. This call does work when less memory is needed/used.
The important thing is if it uses that bit. The bit is used for example for global memory allocation (for VA/d&d protocol for example).