Ok, finally fixed for me. I had to add ... in /inc/utils.inc.php 

ini_set("memory_limit",'512M');

Now I have no more error and it processes a 130 MB MP4 in 8 minutes. I do not tell you how happy I am, it's been 6 months since I'm looking for the solution to this problem.
Amitesh Kumar  try this at your house, and tell me if it works for you too.

Strange problem anyway, I did not have to do that in Dolphin running on the same server, maybe Una Team can explain that?