This is probably because the limit on PSD files is 30000 pixels. You can save a 300,000 pixel image but that is another format, PSB. As a test, try cutting your image to 30,000 pixels. You should be able to save as a jpg (and I think it will still be way too big).
From the PSCS3 help file….
Save large documents
Photoshop supports documents up to 300,000 pixels in either dimension and offers three file formats for saving documents with images having more than 30,000 pixels in either dimension. Keep in mind that most other applications, including versions of Photoshop earlier than Photoshop CS, cannot handle files larger than 2 GB or images exceeding 30,000 pixels in either dimension.
Choose File > Save As, and choose one of the following file formats: Large Document Format (PSB) Supports documents of any file size. All Photoshop features are preserved in PSB files. Currently, PSB files are supported only by Photoshop CS and later.
Photoshop Raw Supports documents of any pixel dimension or file size, but does not support layers. Large documents saved in the Photoshop Raw format are flattened.
TIFF Supports files up to 4 GB in size. Documents larger than 4 GB cannot be saved in TIFF format.
