would it be useful to add a very small chest? say 4 slots?
This would make large groups of chests, or long chests, not take as much memory?

Do you mean if I'd make sprite that covers 2x2 area and use it instead of 4 1x1s? That would help the memory usage of the mod a little but I'd suggest looking into how big merged chests you really plan to use and set the limits as low as you can. You don't even have to plan that much into the future, just make a first estimation, you can always increase the limits if you need a bigger chest.

perhaps i misunderstood the memory issue.

I thought it was about the storage space, not the sprites. is the memory about sprites for the chests?

Chest items are probably just a pointer in C++ game code so it shouldn't be that large. But the sprite definition could get quite large when you have large chests enabled.