I've had ~9GB of music on my 16GB phone for the past three years and it's been no trouble. I have never been constrained for space. I could easily pare it down to 1/4 that if needed. I currently have 2.5GB free space on the phone.
I have about 40GB of music on my MacBook, so even the 32GB model wouldn't hold it all. I don't need all of it at all times, anyway. 32GB would be nice to have, I suppose, so I could fit even more music on the phone, but for an extra $100, I'll pass.