This is just a quick query to see if 128mb of PHP memory is on the excessive side of normal?
A little more info; The issue I had was when uploading images, WP would try and process the image but would eventually hang (unresponsive white screen or get stuck on 'Crunching') or spit out a generic error. Upon investigation, my hosts default PHP memory limit was 32m. Upping this to 80m using a php.ini file, everything worked fine for a while, until I tried uploading an image 4mb in size. Same problem. I have since increased the limit to 128m, and my 4mb image uploads just fine now. Considering the default limit of my host was 32m, I've had to increase this by a factor of four to ensure normal, smooth operation. I am using WordPress 3.5.