I'm not sure if I understood your advice,...

I made two suggestions that would reduce memory usage, please try them both out, and if your problem is solved, then you know one of the two solved it ...

Growing a string line/by/line does not decrease memory usage, that is still slurping the whole file into memory

Another thing to check is your version of CGI.pm (get the latest for bug fixes), and check that no POST_MAX has been set

Also, try a different file :)