Wow, welcome to three years ago. As soon as I got my (1st gen) iPhone I never saw the need for an iPod ever again. Before that I had a 60gb iPod Photo and while it was a little tough at first to go to a smaller collection on my iPhone, the convenience completely trumped any desire for more.
Every year the iPhone gets the ability to store more, and that's great, but I can never listen to the amount of music I have on it before I want to load up more.
That said, always buy the largest iPhone available, it makes living with the limited space a little better.