They're making Powerbooks and Mac book pro's (very small computers) with 120 gig hard drives... what's stopping them from making an iPod with that big of a hard drive?
The powerbooks/portables use 2.5" drives (the MBP I know uses Serial ATA drives, not sure about the powerbooks). The iPod uses a 1.8" IDE drive. Development is slower and probably more expensive. Most likely, the 1.8" drives will get to 100+ GB, but it will take some time.