I am looking for a host for a new project I am planning. When planning came to transfer volume requirements, two of my co-designers said that we would need at least 20-25 Gigs even though we won't offer multimedia/galleries or a large number of downloads. That's also "because of all the search engine traffic", etc.

No that kinda surprised me because I didn't plan on going to a dedicated solution, yet. Most US hosting companies don't offer more than 10-15 Gigs/mo for their virtual plans, maybe except for their most expensive plan. One of the biggest German hosters however offers 25 Gigs/mo with standard features for $20/mo. This surprised me as well.

Just wondering, what are the typical traffic volumes when I should start considering dedicated hosting?

You should start considering a dedicated server when it would be cheaper than shared hosting.

With prices as they are now, that means when your monthly hosting bill reaches around $100-150.

I think it really depends on the type of site you have. Some dedicated companies will try and sell you a powerful server with only 10 gigs of monthly transfer. How any site can effectively/ cost effectively use such a server I can only guess.

I manage a site that gets less than 15 gigs of monthly tranfer, but is in quick need of a transfer to a dedicated machine, due to the dynamic content.

Instead of thinking in terms of virtual & dedicated, I think it's a good idea to just split the issue using cost. Set a cost you're willing to pay, and locate the best deal. Sometimes it's a virtual package, sometimes dedicated.

But make sure that best deal is not cheapo scam companies that offer 25 gb of bandwidth for 20 bucks or less.