In v2 both site and list templates had a size limit of 10MB which meant that you often had to save without content in order to create a template.
In v3 this limit has been removed. (but see below *)
To increase the size of the template you want to be able to save with content you use the WSS command line utility stsadm.exe.
For example, to set it to 20 MB, the command would be:
stsadm -o setproperty -pn max-template-document-size -pv 20000000
(where max-template-document-size is in Bytes)
Note: It is possible that in RTM one or both of the following are also available
a) The UI says what the current limit is set to when you go to save a template
b) The UI says the size that the template would be
(DW)
Note that it is useful to have a lot of memory when using large templates. See the warning text below.
The following risks exist with regards to large sized templates:
1) If the templates that are saved and used are very large (full of data/etc), note that the whole thing will have to be loaded into memory when you provision. With a large template, this would be very resource starving and intensive, potentially causing a high level of paging on lower memory systems, which could decrease performance. Think about many people doing this at once as well.
2) If the limit is very high, many large templates could be saved resulting in running out of disk space.
(DW)
* Stop Press *
MVP Todd Bleeker of Mindsharp reports that there now seems to be a 500MB limit.
Here's his message
"The latest information that I had said that the limit was 500 MB. When I tried to set it higher, stsadm returned the following error:
The specified value for maximum template document size is not valid.
Please specify a positive number less than 524288000.
Thanks, Todd !