SQL Server backup fails on disk space error
The error not enough server storage available is misleading.  This is not disk space, but Windows SMB management memory.  Try restarting the target machine (where the backup is being saved), or at least restart the Server service.

See the following Microsoft support link for instructions on potential registry changes that may be necessary at the machine where the backup is being stored. 

http://support.microsoft.com/kb/304101

Also, you might try a search for "Windows Server error 1130" for more info.