Ok then you should go back to 128m as it's probably not a sizing issue (unless your generating tons of classes on-the-fly). Are you sure that Tomcat is really stopped before you try to start it?
Have you enabled persistent serialized sessions? http://tomcat.apache.org/tomcat-5.5-doc/config/manager.html#Restart_Persistence This could be the cause of the problem.
not using persistence. this is so strange... i can see that there is process id , but then it just disappears. i tried reinstalling java, but that didn't work either. should i just reinstall tomcat? thanks for you help!
You may try to re-install Tomcat. Is your application doing something fancy? Running out of PermGen space at the startup is rather unusual. This can happen if you have lots of classes or if classes are leaking somehow. Are you using cglib or something that generates byte code? See http://stackoverflow.com/questions/88235/how-to-deal-with-java-lang-outofmemoryerror-permgen-space-error