Desktop Window Manager is what enables all the aero theme stuff like transparency, and also what stores the contents of entire application windows in graphic RAM, thus allowing you to move windows around smoothly. The amount of video ram you need depends on how big your monitor is, how many monitors there are, and how many open applications/windows you have. With Aero on, that might become tight cusing the errors you are getting. Try the following:
1) Turn off Aero. Aero makes heavy use of the video card. See if that makes a difference.
2) Do you have 2 monitors? Try disconnecting one.
3) Try updating your video drivers as well.
The best solution of course would be to invest in a new graphics card, otherwise you'll need to significantly slim down vram usage.