VM is, if not a poisoned chalice, at best a vin très ordinaire. Given more physical RAM versus VM, always go for more physical RAM if you can. Indeed, in the later PPC Macs that allowed up to 1.5GB of RAM, attempts to use VM with more than about 950MB of physical RAM usually confused the inanimate daylights out of VM, which quacked on-screen that there was too much actual RAM for it to function. Too much for the controller to map it accurately to a drive, I suspect to be the real cause. Apple's own published Memory Guide quoted all later Macs as being capable of addressing 1GB of VM, but in an age when physical memory is cheap-as-chips, such as now, VM is not better than a temporary stopgap.
The usual convention for cache setting in the Memory panel is at the rate of 32kB for each 1MB of physical RAM. In those later Macs that set their own cache automatically (OS 8 & 9, principally), it is better to let them do so unless there is a pressing reason to the contrary.
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