ModelSim Intel FPGA Starter edition 10.5b fails to simulate due to mem alloc fail

Without posting some code to help us, I can only conclude there is something wrong with your testbench. Modelsim doesnt use much memory usually.

Is the file you're trying to read large? what are you reading the file to? Given the failures are occuring during elaboration time, are you reading this file to a large signal? Signals take a lot of ram, so even a 128Mb memory simulated as a signal could eat more than 2GB of ram (maybe even smaller).

Without code, these are only guesses. Your assertion that "The model will not need 2GB of memory so run, so something else is failing." is likely to be wrong. Modelsim clearly needs more than 2GB to run this test.