Off topic, but a 304 means that it IS cached in the browser and the browser is just asking the server if it needs to be updated. 
It is doing that because when the cachability is set to public it is not setting a future expires date.

A 304 is better than not caching, but you can remove the 304s by setting up cache control headers in IIS settings for the website.

You might want to try the Free PageBlaster HttpCompression & Caching module which does compression and then caches the complete page so that CPU utilization is minimized. PageBlaster can also set cache control properties, even on static items if you use the PageBlaster StaticFileHandler.

Using PageBlaster will remove a lot of the database calls, but you might have some other module that is causing all those calls to the DB.
I have seen this with one of the tab localization modules.

Any idea what could be causing this?