Hi
You can't turn off the cache as far as I am aware as it is an intregal part of the normal operation of VP.
The cache file is required to store a list of, and apparently, copies of the clips you have selected from your PC and placed on the media list. It also stores the generated thumbnails for the clips that are displayed on the sequence line as well as data related to transitions, splits etc. These data remain in the cache file when VP is closed down. The green progress bar shows that this storage process is under way and further changes to the sequence is prevented until it is complete. You can normally review your clips up to the point where the green bar is moving, but if it trys to play past this point you get the "Generasting Preview" message.
As you work, VP also creates a temporary project file containing the data required to rebuild your project in the event of a crash. The project file however can be saved in a more permanent fashion by the user as the vpj file. Although the vpj file can reassemble your project without the cache folder, it takes a lot longer as it has to visit and load up all the clips from the folders where they are stored on your PC, reassemble the cache file and then your project. If the cache file is already present the process is much faster.
It may be that, as version 3.04 has more video tracks etc. all of which can have their individual thumbnails lines, split positions, transitions and other data, the generation of the cache is far more complex and indeed, it can contain, even for a moderate project, hundreds of files. It could also be that the algorithm used to generate these data is not particularly efficient now, although it may have worked OK in version 2.41. (Just a thought.)
Nat