256kB is rather small. You probably started out with much more (say 8 or 16MB) and used it all up. Anyway, search for php.ini and the settings you can put in it (something like memory_size or memory_limit). I'm not sure what the largest size that LP permits is, but try 8M and 16M values, and perhaps larger. Follow the instructions carefully for creating the php.ini file, and you will have to put a suPHP_ConfigPath entry in your .htaccess to point to the php.ini file.

If there's already a php.ini (note all lower case) in the public_html/ directory, there should already be a suPHP_ConfigPath entry in .htaccess. Otherwise, the existing php.ini is being ignored. If there is no suPHP_ConfigPath entry yet, it would be suPHP_ConfigPath /home/<home dir>/public_html (only give the path to it, not the file name).

Yes, you can just add the settings you need. Try memory_limit. Before changing php.ini, run this script:
It will tell you all your current settings. Make your change to php.ini, and run it again, to make sure the setting changed.

Look at the LP Wiki -- there's probably something there with information on php.ini.

Thanks for your help, it is appreciated.
unfortunately it did not work.

anyhoo, I had a similar problem last week, (Error: Exceed Memory limit) after some digging around the fix was to remove the comments from
//@ini_set('memory_limit', '128M' from the file "gd.thumbnail.inc.php"

this appeared to work at the time.   grasping at straws I uploaded the original file (always back up) and it appears to be working again.

Hopefully this wont happen again....

Cheers
Mark.