Resolution
When using the iiq console 'export filename.xml Identity' operation to export all of the identity data, may cause an out of memory exception with a large number of identities (i.e. >66K).
To avoid this, one can increase the console's JVM memory by editing the JAVA_OPTS properties in iiq.sh or iiq.bat file and changing the -Xmx and -Xms parameters. By default the console runs with 128MB JVM heap size; increasing it up to something between 512M or 1G should provide plenty of memory for the export.