I've had no problems allocating 256 MB for SQuirreL, so the problem is likely just getting precisely the correct syntax in your startup command. My squirrel-sql.bat file uses this line:
start "SQuirreL SQL Client" /B "%LOCAL_JAVA%w" -Xmx256m -cp %TMP_CP% net.sourceforge.squirrel_sql.client.Main %TMP_PARMS%
If your main goal is to dump the contents of a table into a file then SQuirreL may not be the simplest solution. Its need to load the data into memory first will be an issue. I would expect that using the database's standard command line tools would more easily let you run a simple query and redirect the result to a file.
You didn't specify a database technology, but it would be similar with any database. For example with MySQL you could run a command like this:
mysql -u myuser -pmypassword -D foodmart < myquery.sql > result.txt
Matt Dahlman

From: Howard J. Herman [mailto:howard@IdeaVillage.com]
Sent: Wednesday, 01 October, 2008 11:07
To: squirrel-sql-announce@lists.sourceforge.net
Subject: [Squirrel-SQL-announce] heap space

In Squirrel SQL 2.5 I have been unable to allocate more than 64 MB for heap space.  I have a table that is over 100,000 records and this is creating a problem for opening/viewing/exporting.  What is the syntax for opening
Squirrel SQL to grant this amount of memory?  I have tried variants of the -Xmx parameter but without success and also changing preferences for viewing different amounts of records but this has eventually caused an error when reaching the heap limit.