ArcGIS 10.1 was released June 11, 2012. The SP1 service pack was issued October 2012, and the most recent patch to that service pack dates to July 2014. ArcGIS 10.1 will enter Retired support status in six weeks (Jan 2018). Even if I were to accept the "Esri releases updates too fast" argument (this is the first time I've ever heard it), I'd have to question the wisdom of letting a development project lapse five years (and four, soon to be five, major releases) behind the current build. Staying three months behind is wise. Waiting for the x.y.1 release is prudent. Staying fifteen months behind is conservative (and somewhat tricky, since some products start to lose support status at eighteen months). Falling sixty months behind is risky from OS compatibility, database compatibility, and system security standpoints (any of which could cause the errors you're encountering).
The usual route to address "memory leak"-like behavior is to apply all patches and try again. If the tool works for over a hundred datasets at a time, then organizing batch processing to limit execution to one hundred folders at a time is your path of least resistance.
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