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The exact memory allocation needed for how many users has unfortunately not been researched all that much. We are dying for some reliable test data, so we know where to focus our work.
The problem is either
a) The memory is exhausted
b) The script takes too long to execute, so the server will stop it
c) Something else
I believe that the correct solution to this problem will be to implement a cron job scheduler in the XOOPS core framework so mailings can be split into chunks and executed safely. However, this is a feature, which we will not see until 2.1/2.2 - at the earliest.
I am very sorry, but I do not have a simple solution to this problem at this time.
