DotNetNuke, like all asp.net applications, loves RAM, so the more you give it the better (too little RAM and the site will recycle often when it hits the limit) - there is no official minimum, but as you need ~40MB to cover the asp.net framework alone, I would think 100MB would be a sensible minimum, though it depends on the site size (obviosuly if you have multiple sites to an applicaton pool you should also increase the size -though as the sites will likely rarely be busy at the same time you dont have to do a linear calculation)

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Application pools will automatically recycle when it uses more than it's set value - whilst the default is 0 (unlimited) many hosts will set "private memory limit" to a smaller value to ensure one site does not consume more than it's fair share of resources. This is obviously a situation you do not want to happen, so the less you store in cache (and the lesser it's duration is) the better - however storing less in cache can compromise performance - so storing in the file system cache is a good compromise. Whilst it's slower than reading from RAM, if you do have a small amount of RAM then it is a valid option. Changing the caching level i.e. from heavy to light, does not help much as this is simply used to determine the duration i.e. light caching items expired quicker, so again this will impact on performance - if you switch it off you'll notice that performance will be terrible (this is because DotNetNuke is quite "chatty" to the database)

Note: whilst DotNetNuke uses a lot of caching, the data is pretty small in general - you tend to see application recycles if other code stores lots of data, and in cases where the site consumes a lot of resources e.g. if a site has dozens of modules installed these will take up space in the BIN folder and consume RAM - removing unneeded modules is a simple way to free up space that could be better used for site performance.

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