That error message is basically telling you that you are maxing out your RAM or overtaxing your audio card/bus.
Now, I use Garageband a fair amount for assembling professional audio work before then exporting to another program like Logic or Ableton, so I am pushing the program a lot further than a normal user does.
But I typically only get that error message when Ive got a composition open that has, say, 30 separate stereo tracks, and have a MIDI controller connected, and am attempting to trigger a lot of effects (compressors, keyboard emulators, etc., etc.) all at the same time.
So, having said that, here are my recommendations for some general best practices that I feel confident will help you:
1) Start a new project every time you start...well...a new project. I would hazard a guess that continuing to re-open and re-record and re-save in the same project file over and over is probably resulting in a lot of memory leaks. I dont know this for certain, but at the same time, I cant think of any good reason why you should keep using the same project file over and over again...and I can imagine quite a few problems that might result from the practice.
2) I personally would never recommend having another audio-application (like iTunes) open at the same time as I am working in Garageband. Its needlessly overloading your audio card and your RAM. Garageband and iTunes are both very big memory-hogs, and running them both at the same time will sooner or later cause problems.
3) Garageband '11 is an even worse memory hog than the prior version was. And it is buggy as all hell. Given that you don't seem to be using any of the more advanced features, you'll probably run into fewer problems if you just 'downgrade' to a prior version of Garageband.
4) Go check out this link for other general tips on optimizing performance in Garageband across the board, which includes general CPU, MIDI and hard-drive settings:
http://support.apple.com/kb/TA27607?viewlocale=en_US