Number Allowed in a Sim

The first question asked of people complaining about laggy estates is "how many people are allowed in the sim at once." This makes me wonder if there's a block of memory reserved for each possible av according to the setting. Is this true?

If so, will it make a difference, provide a notable increase in available resources, to tell the sim to only reserve enough RAM to accomodate twenty avs instead of forty? Some real numbers would be nice, unless of course the concept is wholly wrong; in that case feel free to post reams of laughter.

Asking about this...

There is no pre-emptive reservation of RAM to accomodate the max number of avatars. Memory is allocated as needed.