Intensity is the amount of work in one go the GPU has to do before it can return its results. It needs to be large enough to keep the device fully utilised yet not so overloaded that the device becomes unresponsive. The faster the GPU, the higher the sweet spot is. Ram is of no use to mining whatsoever. They could even mine fine with only a few MB of ram.
pretty sure most people will run into a roadblock with their CPU before their GPU. you could keep increasing it and get some infinitesimally higher results except your cpu will hit 100% usage
i have 4 5870's on a single core sempron that i run at agg 7 in phoenix, because at agg 8 the cpu is 100%
That is a driver problem. The CPU usage required to set higher intensities intrinsically in cgminer is actually less than at lower intensities.