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I agree as far as the crashing goes -- for Win7, being limited to 1GB of RAM is pretty much asking to crash. It is almost certainly just a regular old too-many-programs-at-once out-of-memory crash.
Regarding calibre installed/portable, the question is where do you plan on using the library? calibre can handle a library on an external drive just fine, and the real benefit of Portable is if you will switch computers.
If you switch between two or more computers, the portable version will allow the program itself to travel with the library -- including the appdata, like library location, what plugins you have installed, etc. Also, you can update Portable once, rather than updating on two computers.
Worth noting also, is that if you want to use 64-bit calibre, you need to use the installed version, as Portable is only 32-bit.
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