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WHY does photoshop do this...???

Miss B

Drawing Life 1 Pixel at a Time
CV-BEE
Yes, setting high undos eats a lot of memory. I have mine set very high though. It is also not uncommon for me when working on a new image or experimenting to make many duplicates of any given layer to try different things on (toggling visibility of layers as I go). Only when I feel an image is "done" (or as done as I feel it will get from it's base state) do I start deleting unused layers. I also need to use groups often, as I am horrible at naming layers when I make them, and have some images with over 1000 layers.
I don't use groups that often, though can certainly see them being useful. That said, however, I'm like you as far as duplicating layers to experiment. Then if it doesn't work out, I can just delete the copied layer and start over with another experiment, or just keep the original layer.

I don't think I've ever had an image/render with more than about 30 or so layers. I can't even fathom how much an image would weigh with 1000 layers. Then again, I guess it would depend on how much is on each of those layers.
 
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