No it doesn't. Win32 has a limit for a given process of 2GB. The PS3 only had 0.5GB of memory in the entire system.
I mean, dropping Win32 is a good idea, but this isn't why. This problem is server end. Put too many people together and the server has to tell everyone what everyone else is doing, which creates an exponential growth load curve.
But to the OP's point - Yes, this is nonsense. I can't do my job as a healer in Eureka half the time on a NM because my party vanishes and the game thinks they're out of range when they're really right next to me. When the NM itself disappears? Absurd. Meanwhile, the combat log is sending me updates on what 100 people not in my party are doing. Do I REALLY need that?
There has to be some prioritization going on here. Enemies and party members should be first. If a load issue happens, occulsion should happen on non-alliance PCs. I don't need to see them to play the game, and I certainly don't need combat log data on them.



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