What if I use my MacBook at work and the kids are at home? They can't access the movies or games stored at my external drive attached to my Airport Extreme without the MacBook present and open and iTunes running. So the Apple TV needs more storage. Or a home cloud kind of use option where it can connect to external drives.
That's how it is now unless those kids are only watching rentals or purchased movies. If it's personal content (your own movies, your own TV shows, your own home movies or- as I suggest- your own apps), it's stored on a connected computer elsewhere in the house. Loading it up with storage like it's a mobile iDevice when it's really not one is mostly a recipe for (IMO, needless) higher prices. (IMO) Much better to give it just enough on-board storage to hold a good chunk of video or the ONE app you want to run at any given time and that should be plenty.

TVs are tethered to a computer and it can be the huge storage that happens to be external.
If Apple tries to build storage inside a new

TV, it will be the same problem they had with the first generation... that no size they choose will make their market happy. If I had all say, I'd keep the

TV storage pretty lean and implement app storage as I've already described it AND
2. also normalize the USB port so that those wanting more local storage without depending on a computer running iTunes could attach whatever size storage they want AND,
3. implement a NAS and time capsule option for storing media on a network attached drive.
But the main point I was trying to make is that this is one kind of iDevice that doesn't generally go out with it's owner. So it doesn't need 32GB, 64GB and 128GB variants. Just as movie files far larger than any iOS app can be streamed over from the computer to which it's tethered, so could any

TV apps (be stored on that same computer).
Very simply, an

TV is like an iPad with the storage OUTSIDE the box... and that storage is flexible in that it can be as much or as little as you want. Need more space for movies you own? Just add another hard drive to your computer. Need more space for TV shows? Add another hard drive. Need more space to store more apps for the next-gen

TV? Add a hard drive.
In your case, I suggest picking up a cheap Mac or Windows machine (even a used one) with big storage and let that be the always-available iTunes computer to feed media to your

TV.