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%username%
I used Microsoft Expression Encoder 4 Screen Capture to capture the desktop, then I used Microsoft Expression Encoder 4 to encode it. But it will not record full screen applications (as you can see in my clip, the video output of the player froze in full screen mode, but actually it didn't freeze, it was just that the recorder couldn't capture).

MAG79
This is what I did according to your instructions:
1. Remove SVP.
2. Restart Windows.
3. Re-install SVP 3.1.2, choose "Change Interface type-Expert" (I did not see "Option-Reset settings", screenshot attached).
4. Open Hidden settings: tray menu - Information - Hidden settings.
5. Find and change setting value: ReloadAVSFactor=0
6. Close Hidden settings file and save it.
7. Exit SVP Manager and run it again.

I have recorded my screen from step 4 to step 7 and then make the player reach high memory usage by seeking and going in and out full screen mode, the message appeared. This time after clicking OK, the player registered 2902MB, but it rarely did that, normally there would be multiple error messages till the player registered ~2900MB (Do not mind the awful video played on the player because I capped the recording fps and bitrate to save file size):
http://www.mediafire.com/?bsz7x16zm5so26e (8.35MB)

I knew the hidden settings were loaded because as I said, I also changed AVSmem=2048 and when I checked the Last used AVS script, I saw SetMemoryMax(2048).

About the ~2900MB, how can I make this permanent? I have 32GB of RAM, 3GB for the player is not a problem.

Yes I did, and I had tested it many times, even restarting Windows. I saw that SVP did read the SVPMgr.ini file as I also changed AVSmem=2048 and when I checked the Last used AVS script, I saw SetMemoryMax(2048).

Edit: I have something to add. Sometimes, after a memory leak warning message (I pressed OK on the message), the player registers higher memory. It was able to register 2902MB not 2895MB (and maybe that was not the final value because it has not reached 2000 yet).