Importing xml file from my .com to new .org – fail, fail, fail!!!

Today(2/3/2012) I installed wordpress in my cpanel at hostgator. I have yet to take down my wordpress.com blog until everything is up and running. I exported my blog and saved to my computer. Upon importing attachments to new domain I get this message:

‘Media “DSCN0222” already exists.
Media “DSCN0227” already exists.
Media “DSCN0222” already exists.
Media “DSCN0241” already exists.

Fatal error: Out of memory (allocated 68419584) (tried to allocate 16000 bytes) in /home/suzcham/public_html/wp-includes/media.php on line 258′

I have tried many different times. And keep getting this fatal error. The “media xxxxx already exists” message is because it has uploaded just certain pictures(the oldest) but doesn’t upload my more current media. All my post are uploaded with tags, comments … I need the rest of my pictures. My exported .xml file is 2.0MB

I have tried:
*using Mozilla Firefox
— emptying history and cache
*using Google chrome
— emptying history and cache
*deleting, from cpanel, everything that got uploaded and trying again
*turning off all plugins
*looking at line 258 to see the size limit, but I have no clue what I am looking at
‘function wp_load_image( $file ) {
if ( is_numeric( $file ) )
$file = get_attached_file( $file );

if ( ! file_exists( $file ) )
return sprintf(__(‘File “%s” doesn’t exist?’), $file);

if ( ! function_exists(‘imagecreatefromstring’) )
return __(‘The GD image library is not installed.’);

// Set artificially high because GD uses uncompressed images in memory
@ini_set( ‘memory_limit’, apply_filters( ‘image_memory_limit’, WP_MAX_MEMORY_LIMIT ) );
$image = imagecreatefromstring( file_get_contents( $file ) );

if ( !is_resource( $image ) )
return sprintf(__(‘File “%s” is not an image.’), $file);

return $image;
}’

I read https://codex.www.ads-software.com/FAQ_Working_with_WordPress#How_do_I_Import_a_WordPress_WXR_file_when_it_says_it_is_too_large_to_import.3F
but do not know how to implement and I am afraid to mess with code and break something. I do not know how to edit the media.php file, as I can only open it in text editor as a read-only file. And considering the size of my .xml file(2.0MB) and knowing that my media(picture) files never exceed 200KB, I don’t know why I am having memory issues.

If someone could point me in the right direction, I would really appreciate it. Thanks