I just bought my first iPod a few days ago as a gift for my wife, which was somewhat devious as I am the one who will be keeping it up to date and will likely listen to it as much as she does.
I originally bought the 20GB under the assumption that it held enough songs and that it was smaller. Before opening the box, I returned it for the 40GB. Here is my reasoning:
(1) The price difference - assuming you'll end up buying the dock which isn't included with the 20GB and which costs $40 - is only $60. 20GB for $340 (counting dock price), 40GB for $400. Getting double the size - an extra 20GB - for $60 seemed like a great deal.
(2) Size: yes, the 40GB is bigger. But I dare say you won't find a circumstance where you'd be fine with the 20GB but overtaxed and overburdened by the 40. It's 0.12 inches - essentially, an eighth of an inch - deeper and 0.6 ounces heavier. The 20 seems slimmer by comparison, but only by comparison. When not directly next to each other, the 40 seems quite manageable. In the past few days, I've managed to increase my upper body strength sufficiently to handle the extra 0.6 ounces with little difficulty.
(3) Capacity: the extra 20GB is never a bad thing. Now, I'm using 16GB. However, I can see getting above 20 pretty easily as I decide to burn more CDs, something which wasn't too big a deal when iTunes was bound to my Mac. Now I want to carry it all with me. Plus, my wife and I have differing musical tastes, so the extra capacity is worthwhile. Plus, if you use it as a Firewire drive, you can never have too much capacity.
All in all, if you assume you will buy a dock, I see little reason not to upgrade to the 40GB unless you're really fond of the relative slimness of the 20GB.
Additionally, as larger models come out, it'll be easier to sell the 40 than the 20, as even 40GB might be seen as "small".