IMHO page caching is mandatory for each website, even those hosted on a super quad-core machine.
That's because I hate redoing the same thing I've already done 10 seconds ago :)

Think of a Drupal page life cycle: request parsing, user auth, modules activation and invocation, content retrieval for node and all of the modules|menus|links|comments, layout composition & rendering, compression.
Moreover most of these steps require a DB query.

Content caching requires only a DB query to retrieve the already compressed result, if still valid.
My suggestion is to enable caching, since it always worth.

As for the DB space,I don't know what kind of site you're building; just to give a reference, the database of this site is near 20Mb uncompressed.