Ok, the update in proposed seems to behave much better.  I enabled -proposed as 
described here:
  https://wiki.ubuntu.com/Testing/EnableProposed

Using the prior version, 0.3.7-1ubuntu11, I repeated the steps described in the 
initial bug description.
 total    32164K
...
 total    57896K
After upgrade to 0.3.7-1ubuntu11.2 and killing the existing n-d process, I got:
 total    32164K
...
 total    33916K

Much better!

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notification-daemon using 237MB of memory
https://bugs.launchpad.net/bugs/67129
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