I'm wondering if anyone else has experienced significant performance penalties when using the ArcGIS buffer function with the 'dissolve' option on point features. My dataset is a shapefile of 260 points, basically clustered into 9 groups so there is a significant amount of overlap. The buffer option executes in a second or so, while the dissolve option executes in 12 minutes. So I'd be in trouble with 10,000 points, right? ESRI knowledge base wasn't too much help.
ArcGIS is utterly woeful for dissolving/merging. We had to do a buffer/merge for 3 million points recently and soon gave up on using ArcGIS -- their help desk didn't have much clue either. Postgres did it in less than an hour using the st_union function.
I suspect Dissolve has difficulty intersecting all the circular arc segments that get created by the buffer operation. Therefore, try buffering with the dissolvetype = NONE, then run Densify to convert all the circular arcs to linear segments before running the Dissolve operation.
I'd be interested in seeing performance comparison of ArcGIS 10.0 for dissolving densified geometries vs. circular arc geometries.