I believe that it is a memory issue, though my machine is no slouch - AMD Athalon 3200, 1 Gig Ram, with 2 64mb video cards.
I had grouped floor plans of a LARGE Hospital with MANY entities. Apparently even though you group entities, ACAD continues to treat them as individual enties when selected. In the past, I have always used the copyclip / pasteclip - without exploding the imported block. This way everything stays together when selecting them.
Bottom line, don't group large entities. - lesson learned.
craigr