what may be happening is AE is looking to render out your project and it guestimates how much file space it will need to render your movie file. unlike targa sequence where it will look for 1.3mb space, it is looking for maybe a gig or whatever final avi or quicktime size the project will end up at once completely rendered. if you try rendering a targa sequence and it starts to render without giving you that error, then you know it is a memory buffering problem where large movie files (avi, wmv, qt, mov, etc) will not be generate because AE thinks there will not be enough room in mem to create the temp file while rendering.
Todd