Your problem is there is not enough available paged memory (only 128KB) to run many programs. You are going to have to try and reduce your kernel footprint. Start by disabling the following kernel config options
General Setup > Configure standard kernel features (for small systems) > Load all symbols for debugging/kksymoops
Loadable module support > Enable loadable module support
Device Drivers > Character Devices > Unix98 PTY support
Device Drivers > Charater Devices > Legacy (BSD) PTY support
File system > DOS/FAT/NT > VFAT (Windows-95) fs support
File system > Network filesystems > NFS filesystem support
Kernel Hacking > Full Symbolic/Source Debugging support
If that does not give you enough space you could look at reducing the size of the ramfs.img size to create a smaller ramdisk.