Unfortunately, I have the same problem.
Since updating ADT / SDK to r14 I can not create my own project either.
I have a simple project that compiles well (sure this is just a shortcut, yehaa \ o /)
But a complex project with: 1 user library 1 linked library
I have this error: Failed to convert Dalvik format: Failed to execute dex: Java heap space
I tried many Eclipse configurations, but without any improvements. I tried installing the SDK from scratch, and Eclipse Indigo + ADT from scratch is also the same pain.
I am really disappointed because there will be a lot in my company, and it is very important for us, and I am very angry with Google, which produces these tools without sufficient tests or documentation **. except: http://developer.android.com/sdk/tools-notes.html
What you can try is to create a new project from scratch and copy src (and res) to.
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