Sums it up for me as well. I'll be sticking with 32GB until they make it standard and I'll move to 64GB.
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I have itunes match but prefer to just have everything on my phone and be done with it. Secondly, and more importantly to a lot of folks, is games. Many are huge. I'm playing Real Racing 3 right now and it's 1.4GB's. Many games are huge in there memory footprint. Those pretty graphics come at a cost. Just because you consider it a waste of money don't mean others don't find it money well spent.
Personally I find the need for a 128GB nuts. But there are plenty of people out there that have the need for that kind of storage and I respect that. I believe Apple is just being greedy by keeping 16GB the base model knowing tons of folks will be upgrading to a higher memory level. I imagine there is a technical issue keeping 128GB from happening otherwise they'd be more than happy to cash those checks, even if it meant the top tier had to exceed the typical $100 step up.