When I read the title of this thread I thought you were referring to the physical size of the phone, which seems like a more interesting question to me then the hard drive size.
Hard drive size increase will happen, it's inevitable ...however when is a question I don't think anyone here will be able to help you with.
I would like to see a bigger iPhone (physical size...up to twice as big ... I wouldn't mind at all... bigger screen and 800 x 600 ? or 1024 x 768? .. would make for much more room to type and edit with the touch keyboard thats for sure.