I am running CW 11.1 under Windows 7 64bit with a S08QE12 project.
I have several projects in the workspace and they all compile, build and debug using my Multilink Universal FX. That is - all except one, which always gives an out of memory error (Java heap space, which it tells me is set at 512MB). If I cancel the error windows and decline to close CW it eventually builds (VERY SLOWLY) and debugs. I have re-installed CW and Windows, but it makes no difference. My workspace is on a cloud drive and so I tried it on another computer (my laptop) and it works fine.
Sorry for the delay in answering.
I saved all of the source files as text and then deleted the project. I then created a new project and copied-in all of the source files. Now it works fine.
F.Y.I. For the last eight years i have been using i-Cloud storage and running CW under Windows 7 as a Virtual Machine on an i-Mac - all without problems. It also runs faster than if I use a native PC (which i have tried).