There may be a memory related bug/ issue but I fear the main problem simply is your approach to his difficult task. As a game developer your goal is to find a way to make it work, and simply building a single huge level is (apparently) not the way to go. You can realize your base city layout with blocks, but then should use entities and/ or wmb entities, use LOD, maybe regions to disable rendering in certain areas, "stream" data of parts of your city, or even go as far and not use shadow maps (from WED/ wmb compiler, disable it) and use dynamic lighting instead (-> less memory).