There is no size limitation to TEMP but free space on the partition
where TEMP resides.
Change the TEMP variable to a drive where you have sufficient free
space.
As mentioned in Walter's response, the size of the temp folder is limited
by the amount of free space on the hard drive. DVDs are quite large so that
could be a concern here.
However, the "out of space" message in regards to this folder can also
appear when there's plenty of free space. In these cases, removing all
other temporary files that are lingering in the Temp folder is often
successful in getting rid of the error message.