Windows XP is most likely the problem. It works on Millennium Edition, but not XP. Maybe a fault with the OS, maybe. Try getting Windows 7 or something then try it.
Blockland needs at least 1 GB of RAM to run properly, correct me if I am wrong. If I remember it goes up to 2 GB of maximum RAM to consume.
If you are lower than the minimum requirement, chances when you do something on the server will crash the entire game.
Also, if people connect, you can easily crash too because networking will also take up RAM per player.