Sorry pizdin_dim - please read what I write! "it used to work fine but as the site grows it is noticably slowing down and consuming more memory." - I'm talking about the site growing, not the software! As explained in my original post, I have never upgraded WP from 1.5.2, it's other people that have brought in issues regarding v2 etc... I know nothing about them.
The version of WP I'm now having problems with on an expensive VPS is the same version I ran with no problems on £11/month shared hosting. My original question was not questioning how much memory it uses, but questioning how the memory usage had seemingly inexplicably gone up! The visitor numbers have crept up slightly over time but not significantly - it only gets about 1000 hits a day.
To expect WP to continue to work in only 8MB of memory throughout it's evolution is foolish.
If the majority of WP users are using hosting with memory limit set to 8MB then WP coders have to cater for this. I'm a webdesigner by trade and whilst I prefer a high screen resolution on my computer I still have to cater for people that only have 800x600 monitors - I can't just rule them out because they won't or can't upgrade! It's the same in this case, you have to compromise some things in order to reach the mass market.