I implemented a simple sitemap class using Django\'s default sitemap application. As it was taking a long time to execute, I added manual caching:
class Short
Assuming you don't need all those pages in your sitemap then reducing the limit to get the file size down will work fine as described in the previous answer.
If you do want a very large sitemap and do want to use Memcached you could split the content up into multiple chunks, store them under individual keys and then put them back together again on output. To make this more efficient, Memcached supports the ability to get multiple keys at the same time, although I'm not sure whether the Django client supports this capability yet.
For reference, the 1 MB limit is a feature of Memcached to do with how it stores data: http://code.google.com/p/memcached/wiki/FAQ#What_is_the_maximum_data_size_you_can_store?_(1_megabyte)