I come bearing the burden of knowledge!! Below you will find my pull of the partitions on the ROM. I'm running KaosFroyo v35. As you can see, my /cache/ partition is 30% used, so there is definitely 70% more space there to play with.
Filesystem Size Used Available Use% Mounted on tmpfs 95.5M 12.0K 95.4M 0% /dev tmpfs 95.5M 0 95.5M 0% /mnt/asec /dev/block/mtdblock3 170.0M 113.8M 56.2M 67% /system /dev/block/mtdblock5 159.5M 90.8M 68.7M 57% /data /dev/block/mtdblock4 130.0M 38.4M 91.6M 30% /cache /dev/block/vold/179:1 14.9G 7.0G 7.9G 47% /mnt/sdcard /dev/block/vold/179:1 14.9G 7.0G 7.9G 47% /mnt/secure/asec /dev/block/dm-0 3.1M 1.5M 1.6M 48% /mnt/asec/com.google.android.stardroid-1
So how do these numbers change as you load more market apps on your phone? I would anticipate that the /cache/ value stay largely constant around 38.4M?
Also can you produce an output file of the "ls" command for the /cache/dalvik-cache/ directory and post as an attachment?