I suppose you are working with 1GB RAM (as you can allow only 500 for preview), so your best bet would be:
Using smaller preview - it's kinda difficult to render full 720p on fly. 360p might be doable, though.
Editing smaller resolution - I edit 480p on 1GB RAM and preview 240p on best quality quite fine, even short 480p (for masking etc.)
Increasing your RAM.
Or, as stated, if you use Vegas 9, switching to 8 or 7 (they are less demanding).