It'll handle all the **useable** gears, plus you want it to handle accidental cross-chaining to the big-big combo. But you can't expect it to handle shifts into the small-small cross-chain combo -- if you do go there, the cage will double up on itself, lose chain tension, and allow the chain to drop.
Medium cage is really the way to go for increased chain tension, decreased chain slap, crisper shifts, quieter running, raised obstruction clearance, and improved spoke clearance.
Don't go there if you want the ability to shift to small-small and remain there.
I always try to avoid using cross gears (like big-big or small-small), and try to use like small chainring-big five, mid chainring-mid five, big chainring-small five. So even if I change the cassette (which I don't think I will anyway), it seems like having a medium cage won't be a big problem. Given the advantages of a medium cage derailleur, I guess it's worth it.