It's likely that your suspicions are correct: the file is just too large for the amount of RAM you have.
To be clear, it's not too big for Blender. Blender can handle any size file so long as the OS can give it enough RAM, quickly enough. Sometimes there is technically enough RAM available, but the OS can't allocate it quickly enough, so it's not available when Blender needs it. This situation is unlikely for small files, but becomes more and more likely as the amount of RAM you're wanting to allocate at one time increases.
I'd recommend one of two tests, 1) find another system with more RAM to try importing the DAE to see if the problem is with the file's integrity, or its size. 2) If you have access to the original data, export a much smaller subset of the data, and see if that works.
It may be possible to export pieces of the model/scene in smaller files, import them separately into Blender, and then put them back together.
Google Sketchup can apparently import DAE files as well, so you could test importing with that.