I've started hitting a lot of Out Of Memory issues in Fiddler over the last few months. After seeing this, I realized that my problems coincided with upgrading to the latest version (v5) when Fiddler started being a 32-bit only application. It would be really nice if we could get a new 64-bit compatible release of Fiddler.
As a temporary workaround, I've set the 'number of sessions to keep' option really low and that has helped but that starts impacting the usability of the tool and still doesn't solve it completely.