Separate installs means separate databases, credentials, security, folders, etc.  It also means more overhead, mostly in databases.  You can run them in separate processes, but you limit the number of sites that way, better is group them in multiple application pools.  There's no limit to how many sites you can have, but performance degrades with more traffic.  Most hosts use a 15% active rule, 15% of your sites will be active at a time.  So with 100 sites on a server, 15 may be getting used at any point in time.

DNN does have more overhead than serving static content, but 40-50 is just a number they've found works for them.  Yours may be radically different.  And 4 GB doesn't make a high-end server, in fact now days it's probably the minimum server you'd buy.  Plenty of IIS tuning and performance info is available, check www.iis.net for help there.  Naturally, 100 DNN sites with few modules loaded is better than 50 fully loaded with every module possible, so again, there's no way to give an exact number.

Jeff