16MB Memory Card Too small?

[Shonumi]

That doesn't say anything about the emulated memory card being full, it looks like a general save error. I'm sure most games will specifically complain if there's no save space. Try restarting the game fresh and delete Dolphin's memory card files (back them up of course or just rename them if you have data you want to keep from other games). Dolphin will create a new, blank memory card file. It should be able to save then.