1) Max cache size is 32gb (hit the up and down arrow in the GUI). 4 gig is a good size for today's machines assuming the cache is needed.
2) Caching shouldnt be used in all cases which is why you dont want this turned on everywhere. Ill elaborate on point 3.
3)Client side caching should only be used on WAN links where the lookup on the MA would take too long to efficient process the backup. The idea here is the local cache would have the sigs so it wouldnt have to hop over the network to the media agent. Why this isnt good for LAN based is the following:
Scenario: Say the signature isnt in the local cache but local cache is enabled.
The local cache is consulted, the signature isnt there, so it then checks the media agent. Once it checks the media agents, it then needs to hop back and update the local cache. This also happens in batches, to optimize network usage (which on the LAN causes further delays)
If this was on local LAN without the cache option checked, it would simply check the MA and be done with the lookup.