Yes, and I am one of them. It is very clever, but it's also somewhat devious. They set up a situation where the base model clearly has too little storage for most people, and you can only quadruple it for $100.
I don't think they'll ever go to 32/64/128. The 32GB bump just isn't worth $100 anymore. It'll probably stay the same next year (16/64/128), and then perhaps just go 32/128 in two years time, with a possible 256 GB option at some point down the road.
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The bigger screen on the 4.7" alone is absolutely worth the upgrade. Lets face it, no one really "needs" an iPhone, especially a newer one. Yet I have money, and I have to spend it on something. Dropping around $250 (after resale of 5s) for a new iPhone 6 is a paltry investment compared to how much use I get out of the thing.