How does the transaction buffer work?

Hey,

How does Postgres (8.0.x) buffer changes to a database within a
transaction? I need to insert/update more than a thousand rows (mayde
even more than 10000 rows, ~100 bytes/row) in a table but the changes
must not be visible to other users/transactions before every row is
updated. One way of doing this that I thought of was start a
transaction, delete everything and then just dump new data in (copy
perhaps). The old data would be usable to other transactions until I
commit my insert. This would be the fastest way, but how much memory
would this use? Will this cause performance issues on a heavily loaded
server with too little memory even to begin with :)

-veikko