Currently I have 2 small servers in an memcached cluster. We are approaching out limits with them and need to grow. What are the pros/cons or going adding another small instance compared with having 2 medium size instances?
Facebook's Engineering blog talked about some of the issues they faced with scaling Memcahced: http://facebook.com/note.php?note_id=39391378919. Also, when you upgrade you should make sure that you can handle the normal load even if you were to lose a server. This probably means that adding a single small instance would not be the way to go, although two more small instances would work.