Same thing happened to me. I sent a text, got a reply, and when I went to send a follow-up reply, I got the message:
The application Messaging
(process com.android.mms)
has stopped unexpectedly.
Please try again.
So, tried again a couple of times, and 3-4 times in, it crashed the entire phone (caused it to reboot). After it booted back up, all my messages were gone. I had maybe a couple thousand messages in all (mostly text, but a handful of MMS). Phone has 840MB free on the device itself and another 24GB free on the SD card. It's a myTouch 4G running Android OS 2.2.1.
Searching around online, it seems like this has happened to numerous others (including dozens of threads on androidforums). This seems like a problem with the Android OS itself, although I'm not sure what triggers this bug.
The only thing that seems consistent is that nobody can explain (or even theorize) as to what is causing this. I would assume that storing a few hundred kilobytes of text wouldn't be a big deal, but something seems to be causing Android to choke on it (numerous reports on other Android phones as well).