The Ram should suffice, but we are working on tracking down a really nasty memory leak at the moment, which might well be one source of your problem.
Phex should work well with Java 1.5; in fact, the upcoming 3.0 will require at least java 1.5.
The somewhat higher memory useage of downloads might be due to the more complex download behaviour of Phex (it downloads rarest parts first, but can be configured to use employ other strategies like beginning of file first, or beginning and end).
As far as I know, Gregor is working on the Downloads at the moment, but I can't say how far he already got. If you can read Java code, the following subversion branch might give you some insight:
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http://www.phex.org/wiki/index.php/S...ownload_Rework
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https://svn.sourceforge.net/svnroot/...rework-branch/