I use an O2 XDA Orbit 2 running windows mobile 6.1 and the latest version of Mobile Office. But I had the same problem with previous phone (Orbit) running WM5 and previous version of Mobile Office.
I am a HEAVY user of Word - I am writing a book so will type for an hour or so at a time when on a train etc.
There is no problem until I press the X to save and exit. This is fine for the first 10 or 20 minutes - then it gives me an out of memory warning and tells me to close programs, install a memory card or discard my work.
I have tried saving regularly - if anything it makes it worse.
I have all other programs closed, am storing to a memory card with plenty of space and have tons of memory on the Orbit 2 (128RAM & 256ROM). I can continue to run other programs but word will not save without a soft reset.
I get around the problem by opening Notepad (this is third party on WM6 but did same with std version on WM5) and cutting and pasting entire contents from Word to Notepad. Then I discard the Word doc, soft-reboot and then copy it back into word again. Then it will save OK.
Have also tried changing word save format from docx to doc to rtf but makes no difference.
Any ideas?

Regards

Fluffy

Just a suggestion to work around the problem, before you get a better solution...

By saving regularly only adds to the problem as you have stated. But what about making your individual file sizes smaller, like saving in chapters, or sections of chapters as you type and store ?

Hope it helps....