I usually max out storage on all devices, but I went with the 16 GB, and I have zero regrets. With almost 70 apps installed, I've used about 2.2 GB total. No music, that's what the iPhone is for--it docks with my speakers. No video, that's what the bigass TV my husband had to have is for. Very few books, because I have over 300 stored in Amazon's Kindle cloud. That leaves pictures, and those will either only be on the iPad long enough for fast processing, or because they're part of my wallpaper collection. Just a handful of personal pics will be on there long term--the rest are on hard drives at home. If I want regular access to certain ones, Photobucket has a fine app for accessing my account. Why clutter up my iPad for that?
Besides, buying the smallest iPad means I can justify upgrading when version 2.0 arrives next year. 😀