No matter how much space it had, people would complain and want more. Actually, to be more accurate, the extremely vocal minority would want more.
32 GB with some home sharing is after a month still looking to be fine for me.
I watch things then erase them off the device, keep a few things on it for if I get stuck somewhere. He'll I have a few movies on my iPhone just for the stuck in the E.R./ elevator/ect... situations.
Now I have at least a TB of data on m comp drives, some shared, but I honestly don't need to carry every last byte of information with me.
What I am getting at is, the majority of consumers don't need more storage, and for those that do, there will always be enterprising individuals to cater to that through 3rd party devices, such as synchable wifi harddrives.
Why isn't apple doing it, the fact remains that they will likely still get you to began iPad even if wish it had more space, while most people will be content with the offerings. Why waste the R&D on catering to fringe data-hoarders and risk confusing the average customer.