Hello again Barry. I will try my best to answer your queries.
1. The method you adopted was most thorough however it is not practical. In future, if you ever have to clear your temporary internet files and cache, then follow the instructions in this article and you should do fine. I personally use CCleaner to clear my internet traces, browsing history and other private data, besides using the inbuilt provision in Mozilla Firefox, as I don't trust Microsoft's inbuilt Disk Cleanup utility.
2. The Internet Cache, as you might understand, is used to store a cache of the web pages you visit on your hard drive for quicker loading times. It is recommended you often clear it if you are paranoid about your privacy. As far as I understand, the value alloted to internet cache is measured in terms of MB and setting anything higher than 1024 MB (1 GB) at most seems a ridiculous figure to me. You can be assured that unless you browse the web very extensively, you won't be using even 75% of your alloted cache space. Thus Microsoft has considered the average user's need and allows up to 1 GB to be reserved for cache.
Hope that helps. :)
-- Goku