Well,
Thomson said that he is looking at an 8051 and if the 8051 considered all available devices is not enough space, forget about AVR, there are larger 51-devices. If you think that a 51 might not be big enough, which specific device are you talking about?
The 8052 is an 8051 qith twice the memory, there are 89C51RD2 there are 89C668 (64k Flash 8k SRAM) from Philipes, there are larger devices from Silicon Labs.
If you are touching the top end of available 8051 derivatives, I would not start with it but switch right away to an ARM7 that is lower cost for larger memories. E.g. you can buy LPC2101 as small as 8k Flash and 2k SRAM for less than some 8k 8-bit devices. The LPC2103 has 32k Flash and 8k SRAM and I would not know of an 8-bit device with this memory configuartion that is less than $2.50 like the LPC2103.
If you need larger memories, still the ARM LPC2138 gives you for example 512k Flash and 32k SRAM for less than $10.
I used as an example Philips devices because I am most familiar with them but there are other vendors offering ARM devices at similar prices.
So if you start developing now and you don't know whether an 8051 is good enough my recommendation is, skip 8-bit and also 16-bit, go straight for ARM which offers by far the best price/performance ratio right now.
Bob