java.lang.OutOfMemoryError during JBoss-5.1.0 startup with my ear file

I am getting in to weird problem when I am trying to upgrade JBoss to 5.1.0-GA. (OutOfMemory and OutOfMemory with Native threads). I am having ear file which is having several libraries inside and I am using jdk-1.6.0_29(32b). I am getting this error in the JBoss-5.1.0 start up itself. If you are aware of this problem, Can you please help me here and give your suggestions about this problem? What is the best solution here?

1. If I start server with –Xmx2048m and –Xms2048m, I am getting in to above problems. If I reduce memory to –Xmx1536m, then this problem go away. I am assuming that JBoss5 is not getting enough native memory for loading jar files.
2. I tried to update jboss-vfs.jar file to 2.2.1 version. Still having same error. Should I upgrade jboss-vfs.jar to higher than this version ex: 3.1.0?
3. If I upgrade jdk to 1.7. Does it resolve this problem?
4. I have added –Djboss.vfs.forVfsJar=true to JBoss start up script. Then server started successfully. Is it safe to use this parmeter. We want to know what is pros and cons of using this parameter.

2013-01-09 05:18:16,010 DEBUG [org.jboss.bootstrap.microcontainer.ServerImpl] Installing life thread Thread[JBossLifeThread,5,jboss]
2013-01-09 05:18:16,011 DEBUG [org.jboss.bootstrap.microcontainer.ServerImpl] Failed to start
java.lang.OutOfMemoryError: unable to create new native thread
at java.lang.Thread.start0(Native Method)
at java.lang.Thread.start(Thread.java:640)
at org.jboss.bootstrap.AbstractServerImpl.start(AbstractServerImpl.java:476)
at org.jboss.Main.boot(Main.java:221)
at org.jboss.Main$1.run(Main.java:556)
at java.lang.Thread.run(Thread.java:662)

2013-01-09 05:18:18,977 ERROR [org.springframework.batch.core.step.AbstractStep] Encountered an error executing the step
java.lang.OutOfMemoryError
at java.util.zip.ZipFile.open(Native Method)
at java.util.zip.ZipFile.<init>(ZipFile.java:127)
at java.util.zip.ZipFile.<init>(ZipFile.java:143)
at org.jboss.virtual.plugins.context.zip.ZipFileWrapper.ensureZipFile(ZipFileWrapper.java:175)
at org.jboss.virtual.plugins.context.zip.ZipFileWrapper.openStream(ZipFileWrapper.java:213)
at org.jboss.virtual.plugins.context.zip.ZipEntryContext.openStream(ZipEntryContext.java:1082)
at org.jboss.virtual.plugins.context.zip.ZipEntryHandler.openStream(ZipEntryHandler.java:153)
at org.jboss.virtual.VirtualFile.openStream(VirtualFile.java:230)
at org.jboss.classloading.spi.vfs.policy.VFSClassLoaderPolicy.getResourceAsStream(VFSClassLoaderPolicy.java:483)
at org.jboss.classloader.spi.base.BaseClassLoader$2.run(BaseClassLoader.java:534)
at org.jboss.classloader.spi.base.BaseClassLoader$2.run(BaseClassLoader.java:532)
at java.security.AccessController.doPrivileged(Native Method)
at org.jboss.classloader.spi.base.BaseClassLoader.loadClassLocally(BaseClassLoader.java:530)
at org.jboss.classloader.spi.base.BaseClassLoader.loadClassFromDomain(BaseClassLoader.java:789)
at org.jboss.classloader.spi.base.BaseClassLoader.loadClass(BaseClassLoader.java:441)
at java.lang.ClassLoader.loadClass(ClassLoader.java:247)
at org.springframework.batch.classify.SubclassClassifier$ClassComparator.<init>(SubclassClassifier.java:135)
at org.springframework.batch.classify.SubclassClassifier.classify(SubclassClassifier.java:109)
at org.springframework.batch.core.step.item.SimpleRetryExceptionHandler.handleException(SimpleRetryExceptionHandler.java:80)
at org.springframework.batch.repeat.support.RepeatTemplate.doHandle(RepeatTemplate.java:293)
at org.springframework.batch.repeat.support.RepeatTemplate.executeInternal(RepeatTemplate.java:219)
at org.springframework.batch.repeat.support.RepeatTemplate.iterate(RepeatTemplate.java:143)
at org.springframework.batch.core.step.tasklet.TaskletStep.doExecute(TaskletStep.java:248)