large database versus many databases

Hi,

we are currently planning a very large installation of a web-application
using PostgreSQL. The application can be configured to handle 1 database
per customer, or all customers in one large database.

We plan to start with e.g. 500 customers, each of which can have 200 MB or
more in the database. And we want the system to be expandable as needed
(thousands of customers, using lots of memory).

Has anyone any experience what is best
- using one very large database for all customers or
- using 1 database per customer

concerning expandability, performance, server configuration, system updates
etc.

Is it advisable not to install more than a certain amount of databases on
one server?

Any hints welcome,

Thanks, Uwe