DRAM and SRAM have a lot of performance difference, not of the order it used to be once, but by a factor of about 10 to 50.
yes the cost is one important and the biggest impediment, imagine what would be the cost of the system if one decides to have even 128MB of SRAM! The system wont need any cache then!
Yes, the amount of cache does have diminishing returns as the size increases, but that depends a lot on the data set the processor works on. For most day-to-day aplications even 256k is pretty big, as evident from the low performance difference between a P-III 800/100 and Celeron 800/100.
As the applications become more and more processor intensive, like compiling, graphics manipulation, serving the amount of cache starts coming into the picture. For such applications, larger the cache better is the performance, because most of the code (or even data for some applications) once in the cache is needed a lot. So servers tend to have larger cache in order of MBs! A desktop system simply does not need this much cache. Perhaps thats why intel opted for half the cache on desktop P3s, 512k was too big.
girish
<font color=red>No system is fool-proof. Fools are Ingenious!</font color=red>