The time it takes to process a policy cycle is dependent on the number of policies, rather than the size. However.
The "size" of a policy depends on the number of templates you leave in.
When you create a GPO. You are spec'd with 5 default templates, system, network etc...
When that GPO is saved, all possible settings are saved, creaing an X sized policy. Whether you actually configure 1 of these settings, or every single setting. The policy will still by the same size. To decrease the size (in disk capcity sense), remove any of the admin templates that you do not need.
The speed that the policies are applied is fairly irrelevant, its done cyclically to change plain text in the registry, it isn't setting anything, and doesn't need to wait for "processing" as such. However, it detects a change in the datestamp between the existing client policy and the one on the Sysvol server, then it will need to download all the policy files, this is where it can take some time.
Policies are only "applied" once, untill they are changed again, so unless you are making changes on a daily basis, this shouldn't really be an issue either.
Hope this Helps.
Neil J Cotton
njc Information Systems
Systems Consultant