I'm not sure I understand the question. I do know that you are referring to internal physical memory and not hard disk space. I am assuming you are worried about the VM of building the game. The VM is just that -- virtual -- and therefore the internal ram is not necessarily a concern. So, if my assumptions are correct you only have to worry about the 1.8 GB cap. When it builds the game, each level will have close to that amount of VM, although there is a little bit of used memory that is carried forward. Those who had been working on v1.20 have tried to make sure that most of it is left for subsequent levels.
Although I have not tried building a game with less than 1 GB of physical ram, I believe you should be able to build a game with 10 levels as long as each of the levels are below the 1.8 GB.
I'm sure that I will be corrected if I have something wrong in my assumptions or someone will explain it in a different way to make it more understandable.
Addendum:
I see Scene commander has responded while I was typing. Yes, I might be wrong as far as the availability of VM when the physical memory is smaller than the 2 GB allowed.

I'm addicted to programming and coffee!