When trying to save a 300 dpi CMYK image as a JPEG with settings: maximum quality, optimized for uploading a full page ad, photoshop 7 returns the error:
The system has 2 GB of free ram and over 40 GB of free disk space, so this must be a photoshop glitch. Anyone have a workaround? They want a JPEG, but with maximum quality/minimum compression, for fast internet file transmission. I was under the impression that optimized had more quality than baseline/standard jpeg format, or is this not necessary? Baseline does save fine.

With quality set to maximum quality / minimum compression I wouldn't worry much about standard vs. optimum. It makes a big difference when saving small files for the web with medium compression / medium quality to help prevent artifacts from showing up on high contrast edges, letters, etc. but with quality set to maximum makes less difference.

Live with it, upgrade photoshop to photoshop CS3, or save as a PSD/TIFF and use a different program to save the final jpeg to upload such as corel photopaint which has no such issue with optimal.