I like this idea, and it has proved useful with other programs.
Having both a Save and a Save Iteration would be good.
As for the sizes and amount of files, 2 obvious solutions spring to mind.
1 :: Self control: It's up to the user to keep an eye on the amount of files and filesize, and a good coder with poor organisational skills is a poor coder.
2 :: An option in the preferences to set the amount of iterations to keep. Set it to 10 and when it reaches the limit it gets rid of the first of the backups and adds the new one.
It could either delete the first of the current 10, or simply move it to a pre-defined directory.