constant crashes with: error E_OUTOFMEMORY

i really need some help with this, mnc is constantly crashing after 10-20 minutes with this in the launch.log:

Code:

Critical: appError called: Direct3DDevice->CreateTexture( SizeX, SizeY, NumMips, GetD3DTextureUsageFlags(Flags), (D3DFORMAT)GPixelFormats[Format].PlatformFormat, GetD3DTexturePool(Flags), Texture2D->GetInitReference(), NULL ) failed 
 at c:\ContinuousIntegration\projects\HostileFullBuild\hostile\publish\unrealengine3\Development\Src\D3D9Drv\Src\D3D9Texture.cpp:86 
 with error E_OUTOFMEMORY, 
 SizeX=2048, SizeY=2048, Format=DXT1=D3DFMT_DXT1, NumMips=12, Flags=, TexMemoryAvailable=1699MB
Critical: Windows GetLastError: Not enough storage is available to process this command. (8)
Critical: appError called: Rendering thread exception:
Direct3DDevice->CreateTexture( SizeX, SizeY, NumMips, GetD3DTextureUsageFlags(Flags), (D3DFORMAT)GPixelFormats[Format].PlatformFormat, GetD3DTexturePool(Flags), Texture2D->GetInitReference(), NULL ) failed 
 at c:\ContinuousIntegration\projects\HostileFullBuild\hostile\publish\unrealengine3\Development\Src\D3D9Drv\Src\D3D9Texture.cpp:86 
 with error E_OUTOFMEMORY, 
 SizeX=2048, SizeY=2048, Format=DXT1=D3DFMT_DXT1, NumMips=12, Flags=, TexMemoryAvailable=1699MB

Address = 0x7538b760 (filename not found) 
Address = 0x740edf60 (filename not found) 
Address = 0x5ce2b1   (filename not found) 
Address = 0x2af4fb30 (filename not found) 
Address = 0x1d02844  (filename not found) 
Address = 0x1d02844  (filename not found) 

Critical: Windows GetLastError: The operation completed successfully. (0)
Log: === Critical error: ===
Rendering thread exception:
Direct3DDevice->CreateTexture( SizeX, SizeY, NumMips, GetD3DTextureUsageFlags(Flags), (D3DFORMAT)GPixelFormats[Format].PlatformFormat, GetD3DTexturePool(Flags), Texture2D->GetInitReference(), NULL ) failed 
 at c:\ContinuousIntegration\projects\HostileFullBuild\hostile\publish\unrealengine3\Development\Src\D3D9Drv\Src\D3D9Texture.cpp:86 
 with error E_OUTOFMEMORY, 
 SizeX=2048, SizeY=2048, Format=DXT1=D3DFMT_DXT1, NumMips=12, Flags=, TexMemoryAvailable=1699MB

Address = 0x7538b760 (filename not found) 
Address = 0x740edf60 (filename not found) 
Address = 0x5ce2b1   (filename not found) 
Address = 0x2af4fb30 (filename not found) 
Address = 0x1d02844  (filename not found) 
Address = 0x1d02844  (filename not found) 


Address = 0x7538b760 (filename not found) 
Address = 0x740edf60 (filename not found) 
Address = 0x5ce2b1   (filename not found) 
Address = 0x263fb00  (filename not found) 
Address = 0x1d02844  (filename not found) 
Address = 0x1d02844  (filename not found)

there is no patch log.
im running a system with win7 32bit on quad core q9400 @ 3.6Ghz w/4GB of ddr2-1200, a nvidia gtx 275 w/896Mb, and on a hd with 200Gb free, a 10GB page file and a 700W power supply.
im running nvidia drivers 270.81 after running 270.61, i switched hoping it might be a driver issue, it wasnt.
my systems fully stable, every game i have runs fine and can be played for days if i so care to choose to, including other ones based on the unreal 3 engine.
i have turned shadows down or off to no effect
i have done multiple sfc checks to no effect.
i have checked that my directX files are up to date, they are.
i have deleted all mnc related files from the common folder, unrealengine3 folder, and even from the steam userdata folder and disabled cloud sync incase it was bad settings (lost my custom classes..) and then reinstalled, no effect.
i even read forums pertaining to games that had the unreal engine in them and had this error and have done edits to the hostileengine.ini that was suggested such as,
bSmoothFrameRate to False
bInitializeShadersOnDemand to True
UseMinimalNVIDIADriverShaderOptimization to False
UseVsync to False
nothing, nada, no fix
I have read that this particular out of memory error has to do with shader memory, but how do i resolve that? im monitoring all my memory levels in game on a second monitor, ram/video ram/swap space used and none of them get close to being fully used..

Im at the end of my ropes here i really enjoy the game but cant even play a full match at times if at all, as far as i can tell ive done everything i can think off.. would anyone be kind enough to help? :?:

update: i have found one fix that so far seems to work... force dx10 mode