Every time you apply a 'Multires' modifier and adjust the quality of the mesh, 3DSMax has to keep two copies of that mesh in memory.
I work on a 2GB RAM laptop, and was frequently getting Out of Memory errors. To solve this, you should edit your boot.ini file usually located in the root C: drive, and add the /3GB switch to the following line:
multi(0)disk(0)rdisk(0)partition(1)\WINDOWS="Microsoft Windows XP Professional" /noexecute=optin /fastdetect /3GB
You will have to restart your computer before checking if it worked ... failing that - buy more RAM ...
