I just ran across a white paper from Microsoft called "Batch Compilation, Recompilation, and Plan Caching Issues in SQL Server 2005."
http://www.microsoft.com/technet/prodtechnol/sql/2005/recomp.mspx
It provides a great explanation on how SQL Server 2005 deals with compilation and plan caching. As you may know, many aspects of these features changed from 2000 to 2005, and this paper points out the differences.
How SQL Server deals with this topic is often misunderstood, but once you read this white paper, you will know the facts, and you will be a better DBA for it.