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Most likely it has more to do with NAND shortage. It was probably easier to acquire 256gb over the more desired 128gb for mass production. Especially since we’ve been hearing about production problems with the X.
 
I use iCloud Photo Library with my devices set to optimized space (except for Mac) so I could just do 64gb and upgrade the back end (iCloud) as needed.
Ah! Could I ask this just for safety:
  • I have a 128 GB model.
  • iCloud Photo Library with optimised space is enabled.
  • Settings > General > iPhone storage tells me that Photos takes up 29 GB of space.
  • That tips the storage I use over the half-way mark: I use 85 GB. Without the photos that leaves 56 GB of other stuff.
If I get a 64 GB model and attempt to install a complete backup of my current 85 GB - of which Photos take up 29 GB - would iCloud Photo Library automatically realise what I was trying to do, and move most of the 29 GB of photos up, up in the cloud?
 
Ah! Could I ask this just for safety:
  • I have a 128 GB model.
  • iCloud Photo Library with optimised space is enabled.
  • Settings > General > iPhone storage tells me that Photos takes up 29 GB of space.
  • That tips the storage I use over the half-way mark: I use 85 GB. Without the photos that leaves 56 GB of other stuff.
If I get a 64 GB model and attempt to install a complete backup of my current 85 GB - of which Photos take up 29 GB - would iCloud Photo Library automatically realise what I was trying to do, and move most of the 29 GB of photos up, up in the cloud?

Yes. Or at least it should....

However make sure your photos are there and you have space in your iCloud. If its full somethings might not be backed up. Keep in mind ALL your photos and videos are already in your iCloud at full resolution (optimizing a devices keeps a low res version on the device and downloads the full res version when you click on it).

Once you restore make sure optimize iPhone storage is turned on in iCloud Photo Library leave the device on wifi and it will start repopulating your photos.
 
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