For those in need of this, Gary LaPointe has updated his gl-convertsubsitetositecollection command to be fully supported.

http://stsadm.blogspot.com/2007/09/convert-sub-site-to-site-collection.html

The only hitch is it assumes SP2. One good reason to upgrade.

Here is a summary of the recommendations for improving performance at each level of storage when high volumes of content are being stored:

Level Performance limits
Site collection
2,000 subsites of any site is the recommended limit.

The same content database is used for an entire site collection. This may affect performance in operations such as backup and restore.

Site
2,000 libraries and lists is the recommended limit.

Library
10,000,000 documents is the recommended limit.

2,000 items per view is the recommended limit.

Folder
2,000 items per folder is the recommended limit.