I installed PBP 2.60 & MCS 3.0.0.5 on my laptop and this code works (selecting 16f84a):

DEFINE OSC 20

FLASH_ON VAR BYTE
FLASH_OFF VAR BYTE
LED_0 VAR PORTB.0

FLASH_ON = 1500
FLASH_OFF = 500

lblLoop:
High LED_0
Pause FLASH_ON
Low LED_0
Pause FLASH_OFF

GoTo lblLoop

End

I tried bumping up the memory allocation for the Windows XP virtual machine that is reporting the out of memory error, but no luck.