Is there any difference between having 4 .5GB memcache servers running or one 2GB instance?
Does running multiple instances offer any benifits?
If one instance fails, you're still get advantages of using the cache. This is especially true if you are using the Consistenthashing that will bring the same data to the same instance, rather than spreading new reads/writes among the machines that are still up.
You may also elect to run servers on 32 bit operating systems, that cannot address more than around 3GB of memory.
Check the FAQ: http://www.socialtext.net/memcached/ and http://www.danga.com/memcached/