yes but in the grand scheme, what percentage of buyers are like ya'll with 100GB+ libraries and an obsessive need to have it all in your pockets all the time.
It's not that obsessive...the way iTunes works if you have a bunch of Smart Playlists and do anything sophisticated with them you basically have to sync your whole library to get things to work right on the device. You can uncheck a bunch of songs but then they won't play in iTunes either....or you can continually uncheck/recheck which is a PITA.
People with large libraries don't necessarily just sit around thinking randomly of some 'obscure' song they want to play...many have sophisticated playlist schemes that work better the larger and more diverse the library is. It's like having a bunch of radio stations that all play great music but are all different, some play top hits, classics, or things that you haven't heard in a while if ever.
God forbid anyone might want to use lossless or have a bunch of videos as well.
I think it's pretty sad that they went from 160GB down to 120GB and have stayed there. It's kind of an embarrassment that will hopefully be rectified very soon. I personally suspect they had to recode the Classic OS in order to handle increased capacity.