I can assure you that what you're experiencing is not, by your description, normal or commonplace. I have used and seen used elevation values for clouds ranging from ground level (literally 0) to *millions* of meters (for some experiments others have done to simulate nebulae in space). In general the cloud system is fairly robust and is seldom the cause of any crashes.
To my knowledge the trImage errors only occur in the following circumstances: A: Rendering at high resolution or in a memory limited scenario and the primary render buffer runs out of memory - this should not be an issue for you with 4GB of memory. B: Attempting to render an imported object with a high resolution image map texture, or otherwise utilizing/loading a high resolution image map (as a mask or ground texture for example). C: In some cases missing images or other inconsistencies can trigger this as well, but it's much more rare. From what you've described none of those should be occurring.
Let's step back a moment and make sure that the specific scenario you're describing is fully understood. You are saying that the problem occurs only *and always* when you add a cloud layer that is above 3000 meters. You haven't mentioned any other details about the scene so I'm assuming this happens *even in the default scene*. Testing that is extremely important because the default scene should have absolutely nothing in it that would trigger the trImage error, and the default image render resolution is low enough that it also would not trigger it, even on a system with very modest specifications (which yours most certainly is not).
Assuming it does happen in the default scene I'd say there must be something unique to your configuration as I certainly can't reproduce that problem here, and I have not heard any other report of anything similar from anyone else here. The most likely culprit would normally be graphics drivers, especially considering you are probably running on a limited mobile graphic chipset (although you didn't specify), however if the error you're seeing is really trImage-related rather than specifying a dll like OPENGL32.dll or NTDLL.dll, then that explanation seems questionable. It's worth checking for updated drivers anyway of course. You might also try excluding TG2 from the "Data Execution Prevention" function of Windows XP as this can sometimes be overzealous and has caused crashes in the past.
Hopefully we can pin this down with a bit more troubleshooting.
- Oshyan