Actually I wouldn't say the iPhone is
that tightly packed. Look how much thinner the iPod Touch is than the iPhone. Even the 80Gb classic is comparable in terms of size. The iPhone is relatively fat for what it has inside it. Like you said, the iPhone/iPod Touch logic board itself is actually very small what's taking up the "thickness" space is the receiver on the bottom.
This dissection shows what's inside the iPhone. Now if you think of that as one "layer", then what would be the problem adding a 1.8"HDD as a second layer behind this? It would increase the thickness, but not double or tripple it to a 4G iPod size. When a 1.8" HDD is only a few mm thick why assume it'll add cms to the thickness?
Even better, have the iPhone logic and HDD on the first layer with a bigger battery and antenna on the second.
80Gb iPod Classic size:
Height: 4.1 inches (103.5 mm)
Width: 2.4 inches (61.8 mm)
Depth: 0.41 inch (10.5 mm)
iPhone size:
Height: 4.5 inches (115 mm)
Width: 2.4 inches (61 mm)
Depth: 0.46 inch (11.6 mm)
Classic battery life: 30 hours music playback (ie: accessing the HDD)
iPhone battery life: 24 hours music playback (ie: accessing the flash)
The iPod classic is both thinner and has a longer battery life than the iPhone. So no, a 1.8" HDD isn't monstrously big or a power drain.