I worked on a 120Mb file adding multiple layers and functions in Photoshop. I ran it out of RAM fairly quickly but it wrote to the scratch disk as it was designed to do – like watching grass grow but it doesn’t freeze the computer. Any program that freezes your computer with out of memory messages when you run it out of RAM needs to be updated or discarded. I agree with VOX’s recommendation to decide on a resolution and resize down to just larger than you think you want in the collage, but there is no reason to tolerate a program that freezes your computer regardless of file size.
I presume you have the transform tools in Elements and other capable programs like PSP and PhotoImpact. Using the transform tools in Photoshop, collages are a snap. Drag the image into the collage and select free transform. A box appears around the image with handles. You can resize it any way you want so it fits in. If you want to change it after you add some more stuff you can just select the layer again. Other transform tools let you rotate and even change the perspective of each individual picture. You can select irregular parts of a picture before you drag it into the collage and have any level of feathering or transparency you want. You can make a professional looking collage in no time with Photoshop and I presume Elements.
I had an old version of PictureIt that came with my film scanner. It was basically a program for children and people who wanted nothing to do with an image editing program. Maybe they’ve improved it but it wasn’t very useful in older versions.