Some people keep saying that a phone "doesn't need more than xyz GB", what you're forgetting is that this phone also has the potential to be used for more tablet-liek applications. I really like my iPhone 5 but there are several games that I just can't play on it as I'm used to the screen estate of the iPad mini and iPad 3. However, if the 5.5 offers enough space, it'll be a welcome device for me to use and let's face it, there are more and more large apps around these days, 1+ GB.
Ohh I hear you I'm not saying we don't need it I've just lived without it (deleting games I don't use and redownload info when I do).
Bring on the 128 I won't be buying it but I'm sure some will.