If that's what you mean then I'm afraid it sounds like you're mixing a few things up. For example, imagine depth-first search: you're going to need a stack somewhere, whether it's the CPU stack which you use via recursion, or an explicit stack you use via iteration. Iterating doesn't magically remove your need for that space and somehow collapse everything down to one stack frame. And you can reuse temporaries from the heap too, etc.
Fundamentally, there is the question of how much space you need for given algorithm, the question of what algorithm you should use in the first place, the question of whether that particular algorithm should be implemented recursively or iteratively, and the question of what is more maintainable and easier to evolve in practice.
These are all separate questions, but you're conflating them. If your iteration uses constant space but your recursion doesn't, that's because you're not implementing the same algorithm. You're implementing a different algorithm that achieves the same original goal you had. Of course one algorithm might beat the other, that's no surprise.