I am using SQL 2000, but I believe the terminology is the same with SQL 7.
Open up Enterprise Manager. Expand the Server Group, then your SQL server, Databases, and then right-click on your database that is giving you the error and choose Properties.
On the Data Files tab, is Automatically Grow File checked? If so, in the Maximum File Size section, do you have selected Unrestricted File Growth?
Basically, you should have these options selected. If not, then your Data File will be limited in how large it can grow. And once you hit this threshold, it won't grow any larger, which could be the cause of your problem.
Also, the same goes for the Transaction Log tab.
Lastly, the Filegroups tab, do you have Read Only checked for the Primary filegrouup? If so, I would uncheck it, so more data could be written to the filegroup.
hope this helps