I don't understand how more data retrievals causes more memory overhead in the worker process.  Maybe what you have noticed is that the SQL Server process will start to use more memory as it is used more, but that is normal for SQL Server as it does it's own caching.

One thing that may not be immediately obvious is that Light, Moderate, and Heavy caching only increases the duration of time that objects are cached.  
Changing this setting does not change the amount or size of items that are cached although there are small exceptions to this.

Changing this performance setting to Light or Heavy will not make a difference in the amount of memory used as long as the objects are kept from expiring which is easy to do if you have any continuous load / traffic.

Also keep in mind that the disk cache setting in Host Settings is only for modules.  There are lots of other objects that are only cached in memory.  Although, there is a slight exception to that rule also.  If you set EnableCachePersistance or if you enable WebFarm with the file based caching provider (the default caching provider) then you will get caching of these other objects both in memory and on disk.

Thanks for your input.

Although I agree that the cacheing model will impact memory usage it does not explain the excessive memory grabbing that I noted on the worker process. To put this into perspective here are some stats on the DNN installation:

DNN database size: 26MB (mdf file)
Number of portals: 3
    Portal 1: 17 users, 154 pages
    Portal 2: 13 users, 226 pages
    Portal 3: 13 users, 41 pages

Even if every user logs in and the entire database and every page is cached into memory, uncompressed, you're still not going to hit 1.5GB.

I am going to start removing modules and will provide feedback as soon as I know more.

Really been struggling to reproduce this in my dev environment. The memory usage trends are consistent with .Net garbage collection cycles and permanently allocated memory can be attributed to loaded dlls. I have, however, spotted another user complaining of a similiar problem. Here's the link:

http://www.dotnetnuke.com/Community/Forums/tabid/795/forumid/118/threadid/137082/scope/posts/Default.aspx