I found a temporary fix to mine, I'm also using Windows 7 32bit. I have the UDK error also,
What I did was this
http://www.slideshare.net/Kuwait10/wind ... aging-file
raise your virtual memory as shown here, try not to raise too much (I did 6000) and the game worked for me, Though It's not as smooth as should be. but stll gives you a feel for the game if this works..
Hope this helps