I think it's pretty clear that the 16/64/128 dichotomy was a strategic move on Apple's part this year. Clearly, they want to increase their profit margin, and what better way to do it than push people into a higher tier of storage? It's guaranteed that Apple makes a ton of profit with that $100 increase for each tier, when we know that the cost increase in storage is not anywhere near that.
That said, I certainly think the 16gb model would be just fine for a segment of users. The argument that the 16gb variant is not viable because very little 4k video will fit on it assumes that user is necessarily going to shoot at 4k. Most will not. Heck, I'm a video enthusiast and I will probably rarely shoot in 4k.
Disregarding 4k video, there are certainly other things that take up considerable storage as well. But it remains true that 16gb is plenty for some people who really only use their phone for calls, texts, facebook, and web browsing. I think there's a surprising number of people who fall into that camp - some of my friends and family included.
I chose 64gb, and I imagine it'll be the most popular model reaching a middle ground. Apple knows this, and is probably very excited about this. Profit per phone is going to go up. It shouldn't be surprising, then, when we read that Apple gobbles up over 90% of the smartphone profits. Good for them, that's the way to run a business. People are happy to pay, and they are happy to provide at a premium.
