I have started to experiment with liquify but I'm having a problem.

I get started in the liquify dialog window and I'll apply some effects but after just a few tweaks, an error box pops up and says "No more virtual tiles can be allocated". The error repeats again if I try anything besides closing the liquify dialog box. I can still apply the effects to the image, open liquify again and do more...but do I really have to open & close liquify so many times?

I have not had this but have seen others have this issue. I it is a resource issue. What spec have you got for the box, ram, paging space etc and what level of cache are you running in Photoshop?

Are you using Photoshop CS2? I did a google search and found several people having trouble opening the liquify filter in Photoshop CS2...most without answers. I found one reply:

The Liquify Filter will not open for me in PhotoShopCS. Error message states: "No More Virtual Tiles Can Be Allocated".

I had the same problem with Photoshop CS2 and the lens correction filter. I found the cause is that the filter tries to open a temporary file in the root directory of my scratch disk and because I do not work as an administrator the program does not have the access permissions. I have changed the permissions for the scratch disk and now it works.