Yes, people actually would use that much space on a tablet. I've got 29 movies that take up 38.13 GB and I've also got 88 episodes of TV taking up another 39.57 GB.
That's 77.70 GB right there, throw in my 8,562 songs for 47.35 GB and an additional 5.10 GB for the 123 apps I have and you're looking at a whopping 130.15 GB worth of stuff. As it is 128 GB won't even cover everything, and I haven't talked about the Podcasts I listen to or the fact I'd need extra space in order to use the built in camera to take video and pictures; kind of need room for all those extra activities.
Just because your personal needs don't merit a 128 GB device doesn't mean other people's needs don't.
Personally I don't much care if the iPad 3 has 64 or 128 GB, though I would much prefer 128 GB, since I have an iPod Touch for my music and I could offload the videos on it to the iPad. But the upcoming iPod Touch had better have 128GB because between my music library, a bit more than a 1/3 of which still hasn't been imported from my CD collection yet, and the apps, 64GB leaves me pretty close to the limit meaning I have to be very careful on what I buy lest I run out of space.