The documentation states that m_size should be -1 if no additional
memory is needed. But this causes the objects inside the module to not
be deallocated at all.

The attached module (test) stores an object of a type 'Test', which
prints "Deallocation is happening" in it's tp_dealloc. If m_size in the
TestModule is set to -1, this is never reached. If it is 0, it is reached.

I believe this may be related to Python/import.c (l. 592):

   def->m_base.m_copy = PyDict_Copy(dict);

It creates a copy of the module dictionary, but the reference count of
this copy is not decreased when the module object is deallocated, thus
causing the objects contained therein to be not allocated as well.

This bug still exists in Python 3.1.2.

Well, in 2.x you didn't even have the choice. The dict of an extension module was always copied, becoming essentially immortal. In 3.x you can use an m_size>=0 so as to disable this behaviour.

Please correct me if I'm wrong but I believe this applies to all Python 3 versions.