java - Why eclipse does not open when I change the max heap size?

I have installed MAT in eclipse and also the plugin to open IBM format heap dumps.
When I try to open a heapdump with File->Open from eclipse I get a message box error saying:

An internal error occurred during: "Parsing heap dump from 'C:\UserData\heapdump.44124802.212242.6876.0003.phd'".
Java heap space

I assumed that this is due to the max heap size in eclipse. Currently the eclipse.ini is as follows:

-startup plugins/org.eclipse.equinox.launcher_1.1.1.R36x_v20101122_1400.jar
--launcher.library plugins/org.eclipse.equinox.launcher.win32.win32.x86_1.1.2.R36x_v20101222

-product org.eclipse.epp.package.jee.product
--launcher.defaultAction openFile
--launcher.XXMaxPermSize 256M
-showsplash org.eclipse.platform
--launcher.XXMaxPermSize 256m
--launcher.defaultAction openFile
-vmargs
-Dosgi.requiredJavaVersion=1.5
-Xms40m
-Xmx512m

If I change the memory section as follows:

-Xms40m
-Xmx1024m

Then eclipse does not even start:

Failed to create Java Virtual Machine

What is the problem here?