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Let's say I'm playing a Halfling with 7 str and I get hit by Waves of Exhaustion, giving me a -6 penalty to Str. I now have an effective Str of 1, giving me a Heavy Load carrying capacity of 7-10 lbs. Since I'm small, this goes down to max heavy load of 7.5 lbs.
From the core rules:
A character can lift as much as double his maximum load off the ground, but he or she can only stagger around with it. While overloaded in this way, the character loses any Dexterity bonus to AC and can move only 5 feet per round (as a full-round action).
From the halfling entry, average weight for a halfling is 35 lbs. This is more than even double my max load, even after shedding all gear.
So am I disabled, as if I had 0 str? Can I move? Can I wield a weapon? Can I cast spells? What happens?
By the rules? Penalties or damage to Strength don't affect your carrying capacity; only Strength drain (which is much rarer) would do that.
Also, by the rules, I don't think that your character's weight counts against your carrying capacity.