No seriously, now I actually figured it out. 
The following code takes progressively longer until the 10th iteration takes 8.56 seconds.
def add_test
Sketchup.active_model.start_operation('test', true, false, false)
t = Time.now.to_f
for i in 1..100
cd =Sketchup.active_model.definitions.add('test')
cd.behavior.cuts_opening = true
cd.behavior.is2d=true
cd.entities.add_line [0,0,0], [0,10,0]
tr = Geom::Transformation.new
c = Sketchup.active_model.entities.add_instance cd, tr
c.make_unique
c.erase!
end
puts Sketchup.active_model.definitions.count
puts ((Time.now.to_f-t)).to_s + ' seconds'
Sketchup.active_model.commit_operation
end
It turns out what is taking so long is that SU is iterating through 1000 definitions to find a unique name.
The following code runs in 0.04 seconds (213 times faster), simply because the name is already unique.
def add_test
Sketchup.active_model.start_operation('test', true, false, false)
t = Time.now.to_f
dc = Sketchup.active_model.definitions.count
for i in dc+1..dc+100
cd =Sketchup.active_model.definitions.add('test'+ i.to_s)
cd.behavior.cuts_opening = true
cd.behavior.is2d=true
cd.entities.add_line [0,0,0], [0,10,0]
tr = Geom::Transformation.new
c = Sketchup.active_model.entities.add_instance cd, tr
c.make_unique
c.erase!
end
puts Sketchup.active_model.definitions.count
puts ((Time.now.to_f-t)).to_s + ' seconds'
Sketchup.active_model.commit_operation
end