Windows Server 2008 with SP2 (NOT R2) running the Hyper-V role. Server had 48GB of RAM. I have 2 VM servers currently running; our main server has an allocation of 20GB of RAM. The second Server has 8GB of RAM. I got the error message above  when I tried to start a 3rd VM with 4096MB (4GB) allocated. The VM will start if I reduce the memory allocation to 2048MB (2GB) so I assumed that the Hypervisor OS was just being itself and using around 16-18GB of RAM.

Consequently, I bought and added another 32GB of RAM to the Hypervisor so it now has a grand total of 80GB. The Hypervisor seems to be running fine as do the two original servers with the 20GB and 8GB RAM allotments. However, when I try and start the 3rd VM I still get the same error. What is happening?

I did see an article potentially linking the issue to the paging file size of the Hypervisor but most of what I am seeing is saying that the Hyper-V really just works from the physical memory and doesn't rely on the paging file so much.

What am I missing here? Please don't say upgrade to 2008R2 or Server 2012R2 as that can't happen any time soon and I need to get this resolved quickly. My boss, the accountant, wants to know why the money we spent on the memory upgrade didn't resolve the issue!

If you RDP into this Hyper-V Server to use the local Hyper-V Manager to manage it, you need to be sure to logout of your RDP session.

Over time with connections and disconnections the RDP session will chew up RAM.

That is also an old issue with some background google process that a few folks ended up with on their servers.

Also, I am assuming that you hot added the RAM you rebooted the Hyper-V Server.

And, have the Hyper-V Server default settings been tweaked in any way?  Such as increasing the reserve for the management OS?

Appreciate the feedback!

The Hyper-V server was shut down when I added the RAM. Consequently, it came up from a clean boot so there were no RDP sessions connecting to it (other than the one I was using). This server has no other function than Hypervisor. There are no other applications running on it. I saw the posts regarding GoogleCrashHandler and that is not present on the system so we can rule that out.

I inherited the server so I'm not aware of if the default settings have been tweaked. How do I check the reserve for Management OS?

http://blogs.technet.com/b/virtualpfe/archive/2011/08/29/hyper-v-dynamic-memory-and-host-memory-reserve-setting.aspx

While dynamic memory does not pertain to your version, the memory reserve setting does.

MSFT guidelines have always been to leave it alone.  But folks tweak it, and the guidance exists for those folks that feel they need to tweak it.

Good warning here: http://www.hyper-v.nu/archives/tag/host-memory-reserve/