Usman, I purchased a GoDaddy "Value" VPS last Thanksgiving, under a GoDaddy promotion, for $32.5/month for six months. This has 2GB RAM, and I find that when I do a "TOP" command on my VPS, that I have around 800MB free memory. This is why I believe the GoDaddy "Value" VPS (Linux, of course) is the best starting point for Moodle. This particular VPS is my "experimental" VPS, and I am able to continue learning. Also, I found that with Opcache running, memory consumption was a little higher, but I still have 800MB free.
I am not sure where Stefan is in his install, and I see at least two topics on his issues. It's a little hard following all of the advice he is getting.
From my own experience, I am very comfortable running my small Moodle site (15 courses/year, 300 students/year) with this GoDaddy VPS. The server has been very solid, and I haven't needed GoDaddy to resolve an issue for around two years.