I can't be bothered to read all 13 pages of "It's not big enough!" so I apologize if this has already been covered, but has anyone considered that there may be more than one reason to use flash memory? Everyone's talking about slimness, and how they could care less, but honestly, if getting the device slimmer was the only benefit of using an expensive solution like flash, then Apple wouldn't have done it. There are three main benefits to using flash:
1) Slimness. Go ahead and whine about how it doesn't matter, but when you have a company that builds it's entire appeal on slick and cool, it matters. A lot.
2) Battery life. Spinning a hard drive, however small, eats up more battery power than flash does. And we all know that Apple's been slammed in the past on battery life. They're not going through that again.
3) Last but not least, UI responsiveness. Don't you just love that solid feel of a hard disk iPod, when you select an option and you can actually feel the drive spinning to access whatever it is you want? Well guess what. That lag would completely ruin the much-touted touch interface of the touch. Imagine you've spent millions engineering this touch sensitive interface that is polished, fast, and beautiful. Then you match it up to something that basically creates a second of lag behind most of the actions that a user would take. That destroys the slickness, the "elegance," as apple is so fond of saying, of the device. It completely cripples the main selling point, which is not, even if many think it is, "wow this can hold a lot of stuff!" That was the original selling point for the original iPod: your music library in your pocket. When's the last time Apple used that line in it's marketing? 5 years ago?
The product line is changing, people. It's not about carrying every little file and song and video you have. It's about connectivity and hardware/software. Apple knows that anyone who's spending 250+ on a multimedia device probably has at least one computer and broadband internet access. So much of the content that people want is online, which is why wifi is such a big deal with the new iPod. It's all a part of services and entertainment moving online, ala google's web apps. The new iPod is a bridge between the stance that the user should have all the files, and the stance that everything you really want is online. When the original iPod was introduced, online content for entertainment purposes was in its infancy, so the device had to be able to store all of the user's content - and the more, the better. Now, there's a lot more online, and connecting to that is more important. Also, people talk about capacity like they're expecting these tiny devices to keep up with their desktop drive capacity. We're entering an era of absurdly cheap 500gb hard drives, and they're only going to get cheaper and bigger. It would be folly for Apple to attempt to keep up with that kind of storage arms race when storage is no longer the main selling point of their product. Regardless of internet forums like these, Apple is right, from a business standpoint, to choose the priorities that it has: size, connectivity, slickness/user interface.
Just my .02.