I have tried both ways. First I lowered the resolution for BEM surfaces (500v as you recommended). But I ended with the same issue. Then I tried to run the the program on a different computer having 16GB RAM (before I was running it on 8GB system). But again no luck!
@papadop Can you please look into this?
When I was adjusting the EEG channel locations, I did it somehow manuall. ... would you think that could be the possible reason for this issue?
No, unless your electrodes are inside the head volume.
Have you projected the electrodes on the head surface?
Please post a screen capture of the head surface + electrodes.
If you could also include another image with scalp + inner skull + outer skull + cortex (with transparency, as in the BEM tutorial), that could help us detect other problems.
another colleague have already computed a head model in fieldtrip for the same dataset. Is there any possibility to load the already computed headmodel from the fieldtrip into Brainstrom and proceed?
No, this is quite complicated to do. Converting forward model structures is not straightforward.
But you can try computing FieldTrip forward models from Brainstorm with process FieldTrip: ft_prepare_leadfield.