Tried with 09/04 pull of bzr.dev. 

~/.bzr.log (compressed) attached.




$ bzr upgrade --format 2a
starting upgrade of file:///Users/tanner/projects/WoW/AddOns/
making backup of file:///Users/tanner/projects/WoW/AddOns/.bzr
  to file:///Users/tanner/projects/WoW/AddOns/backup.bzr
starting repository conversion                                                 
Python(35552) malloc: *** mmap(size=20480) failed (error code=12)/895          
*** error: can't allocate region
*** set a breakpoint in malloc_error_break to debug
bzr: ERROR: exceptions.MemoryError:                                            

Traceback (most recent call last):
  File "/Users/tanner/projects/bzr.dev/bzrlib/commands.py", line 835, in exception_to_return_code
    return the_callable(*args, **kwargs)
  File "/Users/tanner/projects/bzr.dev/bzrlib/commands.py", line 1030, in run_bzr
    ret = run(*run_argv)
  File "/Users/tanner/projects/bzr.dev/bzrlib/commands.py", line 647, in run_argv_aliases
    return self.run(**all_cmd_args)
  File "/Users/tanner/projects/bzr.dev/bzrlib/builtins.py", line 3162, in run
    upgrade(url, format)
  File "/Users/tanner/projects/bzr.dev/bzrlib/upgrade.py", line 85, in upgrade
    Convert(url, format)
  File "/Users/tanner/projects/bzr.dev/bzrlib/upgrade.py", line 40, in __init__
    self.convert()
  File "/Users/tanner/projects/bzr.dev/bzrlib/upgrade.py", line 79, in convert
    self.bzrdir = converter.convert(self.bzrdir, self.pb)
  File "/Users/tanner/projects/bzr.dev/bzrlib/bzrdir.py", line 3023, in convert
    converter.convert(repo, pb)
  File "/Users/tanner/projects/bzr.dev/bzrlib/repository.py", line 4082, in convert
    self.source_repo.copy_content_into(converted)
  File "/Users/tanner/projects/bzr.dev/bzrlib/repository.py", line 1540, in copy_content_into
    return InterRepository.get(self, destination).copy_content(revision_id)
  File "/Users/tanner/projects/bzr.dev/bzrlib/decorators.py", line 192, in write_locked
    result = unbound(self, *args, **kwargs)
  File "/Users/tanner/projects/bzr.dev/bzrlib/repository.py", line 3393, in copy_content
    self.target.fetch(self.source, revision_id=revision_id)
  File "/Users/tanner/projects/bzr.dev/bzrlib/repository.py", line 1695, in fetch
    find_ghosts=find_ghosts, fetch_spec=fetch_spec)
  File "/Users/tanner/projects/bzr.dev/bzrlib/decorators.py", line 192, in write_locked
    result = unbound(self, *args, **kwargs)
  File "/Users/tanner/projects/bzr.dev/bzrlib/repository.py", line 4008, in fetch
    self._fetch_all_revisions(revision_ids, pb)
  File "/Users/tanner/projects/bzr.dev/bzrlib/repository.py", line 3963, in _fetch_all_revisions
    basis_id = self._fetch_batch(batch, basis_id, cache)
  File "/Users/tanner/projects/bzr.dev/bzrlib/repository.py", line 3898, in _fetch_batch
    not self.target._format._fetch_uses_deltas))
  File "/Users/tanner/projects/bzr.dev/bzrlib/groupcompress.py", line 1600, in insert_record_stream
    for _ in self._insert_record_stream(stream, random_id=False):
  File "/Users/tanner/projects/bzr.dev/bzrlib/groupcompress.py", line 1741, in _insert_record_stream
    flush()
  File "/Users/tanner/projects/bzr.dev/bzrlib/groupcompress.py", line 1635, in flush
    bytes = self._compressor.flush().to_bytes()
  File "/Users/tanner/projects/bzr.dev/bzrlib/groupcompress.py", line 326, in to_bytes
    self._create_z_content()
  File "/Users/tanner/projects/bzr.dev/bzrlib/groupcompress.py", line 319, in _create_z_content
    self._create_z_content_from_chunks()
  File "/Users/tanner/projects/bzr.dev/bzrlib/groupcompress.py", line 307, in _create_z_content_from_chunks
    compressed_chunks = map(compressor.compress, self._content_chunks)
MemoryError

bzr 2.1dev on python 2.6.2 (Darwin-9.8.0-i386-32bit)
arguments: ['/Users/tanner/bin/bzr', 'upgrade', '--format', '2a']
encoding: 'US-ASCII', fsenc: 'utf-8', lang: 'en_US.US-ASCII'
plugins:
  bzrtools             /Users/tanner/.bazaar/plugins/bzrtools [2.0]
  cvsps                /Users/tanner/.bazaar/plugins/cvsps [unknown]
  email                /Users/tanner/.bazaar/plugins/email [unknown]
  fastimport           /Users/tanner/.bazaar/plugins/fastimport [0.8dev]
  launchpad            /Users/tanner/projects/bzr.dev/bzrlib/plugins/launchpad [2.1dev]
  netrc_credential_store /Users/tanner/projects/bzr.dev/bzrlib/plugins/netrc_credential_store [2.1dev]
  pqm                  /Users/tanner/.bazaar/plugins/pqm [1.4dev]

*** Bazaar has encountered an internal error.  This probably indicates a
    bug in Bazaar.  You can help us fix it by filing a bug report at
        https://bugs.launchpad.net/bzr/+filebug
    including this traceback and a description of the problem.