Give it 2GB of memory and 1 CPU should be enough, make sure you carve out 2GB for the DSS Lite and then add disk space for the rest to be used for the Volume. See the video below on how to do this.
I found out the reason. DSS is not able to use the first vmdk file it is installed on, as it's volume. Even if the vmdk has been split into different partition. I have to add 2nd vmdk for it to use as it's volume.