If I understand correctly, the fix is to include in the arduino core (Arduino/hardware/arduino/cores/arduino/) a new file named malloc.c with the code found at
or
which introduces: "malloc, free, realloc from avr-libc 1.7.0 with minor modifications, by Paul Stoffregen"
It did the trick for me, no more crashes so far from dealing with String operations.
Nick, fuh, Andy and the rest of you guys, thanks, you have saved me from a lot of trouble by bringing this issue up and contributing to it's solution!