I think Java 1.5 which is available only to OSX 10.4 & 5 have improved performance a little.

Defragmenting was necessary/helpful under OS9 & earlier, but OSX system drive at least doesn't require it AFAIK also.

I moved many of my applications & now install most of my applications where possible to other drives to save space on the system drive. AFAIK that's the only drive VM is used by OSX. The longer LW is open & the more heavily it is used such as for searches, the more the VM builds up. I haven't been running my LW for days on end like I used to due to other needs of the computer/internet now. So I am not sure about the newest versions (4.14) handling over a week with VM. I think from memory the beta (4.13) did still suffer somewhat but I didn't measure (which is unlike me).

For LW alone, I'd recommend at least 3 GB to be solely for LW. Keeping in mind OSX & every other program requires VM, & the less space there is on the system drive, the slower it tends to get. So basically, as much as possible free space on the OSX system drive. Stief would be a good one to ask about this.

For LW 4.14+ you can also go to LW's prefs > Advanced > Performance & disable all the options on that page. That will at least give some energy back to LW, though not sure whether or how much it affects VM.

Other things to help reduce VM:
Set both uplds & downlds to autoclear.
Close all LW windows you don't need open at that time. eg: Connections window.
If you're not in front of your comp, then hide LW in the dock.
Don't use the Resume button on all incomplete files. This can have side-fx. May queue your files for much much longer. This will also stress LW & your comp. If you use Resume/Find sources then just apply it to a couple or so at one time. Better tool is Searching again using original terms, & also Control-clicking the search tab & using Find more results.

Other things that can add to VM are many incompletes or many shares. If small files, I'd suggest keeping them under 2,000 shared. For large files, perhaps under 1,000 or 500 for videos. (I'm keen to try things out on a new desktop but that won't be for a couple of months at least. )
For incompletes, occasionally this helps: Tip: Purge the Downloads Queue! (click on blue link)