Just my simple testing it takes as long to page and open groupings on the server as it does my desktop. 

I have been monitoring the W3WP.exe process more and watching what it does as I run reports.  I have two W3WP.exe processes running most of the time - one for RS and one that is the shared app pool for the intranet web apps running on this same server.  Their pool is still using default settings.  I create a seperate pool for RS to experiement around with the settings and not affect those other production apps.  The pool for RS has used up to 1/3 G of memory but the server still has 1 G of real memory left.  As I run the large reports, it churns at 45-80% CPU(after the right amount of time it would take take to actually execute the SQL query to get the data) while memory usage does slowly inch up(sometimes is takes up to 200 MB of more memory while rendering a report).  After it is finished and rendered - the W3WP process does not release the extra memory it took while running the report.  Paging a report causes the same CPU (45-60% of W3WP.exe) but it sometmes RELEASES memory while it is paging the report and about half of the time when it is finished paging the memory usage is lower than when it began.  The report with groupings take several seconds longer to page than a similar report without groupings(althought the report with groupings has at least twice as many rows in the dataset).  I can't find a pattern except that when rendering a report for the first time, memory either stays the same or goes up.  When paging, it flucuates and sometimes ends up with less memory allocated (by 100 MB).  Both these reports do have a lot of textual data.

After playing around more with the very small reports I wonder if it's not got some problem with the green circuler reporting executing "thingy ma jig".  None of the reports ever display without displaying this green informational icon first.  Will RS ever dispaly report without displaying this green informational first?  Maybe it's slowing down the display on the very small very fast reports and I have two problems.  One with the large reports and a seperate issue with the informational green thing slowing down the presentation of the small ones.