There is only one way to lower memory usage IMHO: to display dump statements one by one. It means that we should stop output buffering while building dump (easy to do) and create a temporary text file on the server that will contain the dump statements before to be compressed if compression mode is required.
It means we have to setup a directory that is readable and writable by the script where to put these temporary files.
What you think about crete a phpMyAdmin database and use that for temporary data. This also can hold configuration variables, query bookmarks and translation strings.
Loïc
Saludos Edu