When running a visual C# project in the debugger I get an OutOfMemoryE
You are battling virtual memory address space fragmentation. A process on the 32-bit version of Windows has 2 gigabytes of memory available. That memory is shared by code as well as data. Chunks of code are the CLR and the JIT compiler as well as the ngen-ed framework assemblies. Chunks of data are the various heaps used by .NET, including the loader heap (static variables) and the garbage collected heaps. These chunks are located at various addresses in the memory map. The free memory is available for you to allocate your arrays.
Problem is, a large array requires a contiguous chunk of memory. The "holes" in the address space, between chunks of code and data, are not large enough to allow you to allocate such large arrays. The first hole is typically between 450 and 550 Megabytes, that's why your first array allocation succeeded. The next available hole is a lot smaller. Too small to fit another big array, you'll get OOM even though you've got an easy gigabyte of free memory left.
You can look at the virtual memory layout of your process with the SysInternals' VMMap utility. Okay for diagnostics, but it isn't going to solve your problem. There's only one real fix, moving to a 64-bit version of Windows. Perhaps better: rethink your algorithm so it doesn't require such large arrays.