dmace,
In NS6 you would change this sort of setting in CoreSettings.config, either by hand or using the NSConfigurator.  I haven't messed with NS7 enough yet to see if the NSConfigurator was carried over, but CoreSettings.config (or the like) should still be present.  Check the Notification Server directory for this file, and of course make a backup before changing anything!

Update: I checked my test NS7 box and in fact that is where the option is, D:\Program Files\Altiris\Notification Server\Config\CoreSettings.config, there is a line:

  <customSetting key="ItemCacheSize" type="local" value="3000" />

Change the value to 4000 to start and see if that clears the error.  This will probably result in the NS using more memory.

There is actually a KB article about this:  AKB49244.