Well first off you're comparing the memory usage of DSL desktop running FF and a terminal to a server running MySQL and multiple Apache processes. When you say 500mb does that include the cache? Linux will use all the memory available as unused memory is wasted memory. So if you have 512mb of ram in the system I would expect it to hit around 500mb of used memory eventually. It will leave some free for memory allocations for dealing with interrupts and the like. I believe that you'll find that running a LAMP stack on DSL will have similar memory usage compared to Ubuntu Server.
Beyond that I would be concerned about how manageable DSL would be in the long run. I'm not sure what DSL's repositories and package management is like so I won't compare it to Ubuntu. But a quick look at DSL's wiki seems to imply that you need compile from source. Where Ubuntu Server has a solid LTS for easy security updates and huge repositories for any other libraries or applications you may need as well as dealing with any dependencies.
If this is for a business think of the person who may replace you one day. Finding someone familiar/comfortable with running web servers running CentOS, Ubuntu, or RHEL will be much easier than finding someone who is as familiar/comfortable with running one on DSL.