Are you using a 32 bit version of Windows and/or Max? If that’s the case, then no wonder.
Even though you can allocate up to 2GB of RAM in Windows 32 bit, 3GB with the switch or 4GB when running 32 bit Max on 64 bit Windows, there is an additional limitation to memory usage in 32 bit - when Krakatoa, Max or any other program requests a chunk of memory, it has to be contiguous. When the memory allocation requests come in small chunks, Windows can fit them between existing ones even if memory is severely fragmented. But if the requested chunk cannot fit anywhere, you get an error.
In contrast, on 64 bit Windows with 64 bit 3ds Max, even if you have only 4GB of physical memory, the maximum addressable memory space is so huge that the memory manager can pretend the memory were contiguous even if when it isn’t and with a little paging (which makes things very slow) ensure you get your memory. Thus the only crashes you could get with Krakatoa 64 bit are related to actual bugs in the software (there are not too many of those) and never due to memory allocation issues.
During the last couple of years, the idea to discontinue Krakatoa for 32 bit Max has popped up often, but so far we provide it just in case. But we DO NOT RECOMMEND using it for anything.
If you were using 64 bit Max and you still got an error, please report it as a bug.
As for the partitioning, the Count value defines the total number of partitions that will be created. If you hit the “…ALL…” button, all partitions will be saved in a row. But if you would open several copies of Max on the same machine or multiple machines and want to save 1 and 2 out of 10 on one, 3 and 4 on another etc., then you can set the Range to a sub-set of the total count and press the “…RANGE…” button.