Lighttpd

Sounds like 32 MB memory is not enough for lighttpd to read such a large directory into memory, sort it, and produce an HTML page. You can replace mod_dirlisting with your own script to produce a directory listing in a more memory-scarce fashion (or you could not have such large directories). Another alternative is to disable mod_dirlisting for this location and instead to use mod_indexfile. Depending on how frequently this directory was updated, a periodic script could be run to generate a static index.html out-of-band from lighttpd and whatever generates the directory listing index.html could be written to run on your memory-scarce system.

To prevent lighttpd from causing the machine to become unresponsive, you probably should set a ulimit so that lighttpd does not cause memory to be exhausted on such huge directories and for the system to thrash to swap (if configured).

thanks a lot for your reply.
Yes, exactly I wanted to create my own mod_directory listing script to just render an HTML page with plain item names (no html tags) instead of default script.

I went through documentation but couldn't find anything. Can you please point me in right direction?

How about a CGI script;

#!/bin/sh
echo "Content-Type: text/plain" 
echo
ls -f

even before scripting this, I just tried to ls > /path/to/folder/ , same problem with device.
I guess that's a limit on this small-server system I guess.
Thank you though!

Use 'ls -f' for an unsorted listing, or write some script which does the same. For small-memory systems, you can write an HTML page that includes some javascrict which sorts the directory listing on the client side.