you are probably using 32bit jvm, which has a limit around 1.3-1.4GB on windows.
Install 64bit JVM and you can set Xmx to higher values
I am receiving the error as well and I am running 64-bit:
java version "1.7.0_51"
Java(TM) SE Runtime Environment (build 1.7.0_51-b13)
Java HotSpot(TM) 64-Bit Server VM (build 24.51-b03, mixed mode)