Are there any general best practices on ram allocation with respect to VPS's? Or is it tweak it as you go along kind of thing? I run a few Xenserver based vps's and have them set to 2gigs each but I think I am wasting some of that.
It really depends on what you are doing with your servers. I typically start with 512MB of RAM and ramp up from there if I start seeing out of memory events. RAM is king in webhosting and IMO you can never have too much RAM, but if your server is doing fine with a lower allocation, then you should be fine to leave it as is.
What "WiredTree Joe" told you is very important ....
Many people don't realize this but the single most important hardware component in terms of performance before anything else is memory and it's impact on your server is more significant than any other single item whether that be hard drive, processor, network, bus or anything else.
It is true that each of these other items contribute greatly to your overall performance but no where near as significantly as your memory.
When a client asks what they should upgrade when looking for better performance, the very first thing I will always look at is the memory.
Many people don't realize this but the single most important hardware component in terms of performance before anything else is memory and it's impact on your server is more significant than any other single item whether that be hard drive, processor, network, bus or anything else.
It is true that each of these other items contribute greatly to your overall performance but no where near as significantly as your memory.
When a client asks what they should upgrade when looking for better performance, the very first thing I will always look at is the memory.
I would say quality disk storage is important as well unless you have enough RAM to load all of your disk contents into a ramdisk and to work from there but I hope that your server never loses power 
