0 means not to cache the module.  It's not done right away but probably in the normal 15 minutes or so.  Try increasing it 5 minutes or so at a time.  If you look at your logs you should be able to tell how often someone is looking at it and set the cache accordingly.  Don't worry about overloading the server if you start to the admins should move your site to a less busy server.  But setting this for several hours wouldn't cause a problem on a nice beefy server.

Depending on your site I would probably set things to Module caching memory: performance setting Moderate and unless you have a whole lot of text elements on your site the compression setting shouldn't matter to much.  The white space filter turned on makes things load faster but you will pay in search engine results and guys like me will make fun of your ugly HTML.

Yes and no.  Of course any static content will make better use of caching as it doesn't change.  If it changes it can't really be cached.  Unless you are continually swapping photos into and out of the Gallery for every different person that visits, caching is going to help.  The cache setting in the module settings controls the data in the module not the module it's self.  Caching set at the host settings level will control how the modules are cached.  

There are a few levels of caching going on.  Starting from the bottom up:  Module level, DNN Site level, IIS application level, ASP .Net level, and SQL Server level.  The windows server probably does some caching also.  All we have control of as users that are running on a hosted system are the first two.  

Carlos is right, if your site is competing with 2000 other IIS applications your site is probably going to be completely unloaded at times if it's not getting hits and one of the other sites need the resources.