Do you know why there is a need to install games on the PS3?
Besides not wanting to swap disc, it's because it's a 1st generation BRD drive and is kinda slow at reading through the GB's of data.
The system Nintendo uses (CAV I believe) allows them to access data more efficiently, so even if they used a Bluray drive it should be multiple times faster than a PS3 drive and since it will likely have a different file system, they now have 2 reasons why they should be accessing data faster than the PS3 drives. Therefore outside of not wanting to swap disc, you shouldn't need disc installs.
But at the same time optional HDD's haven't been ruled out, as the only thing that was mentioned was the onboard storage, like the Wii, 3DS & 360slim all have.
All 3 of those have optional extra storage and the latter 2 of the 3 even let you boot software from them.
You want to store DLC, buy an SD card, maybe Nintendo will even be nice (like with the 3DS) and throw a SDHC card in the box with the system. 16GB plus the 8GB onboard should be plenty for 95% of the customer base.
Most DLC probably wouldn't be over 100MB anyway, most Wii2Ware probably won't cross .5GB & outside of the possibility of GC games on the VC, no VC games are gonna be bigger than 256MB, so 8GB + 16GB expanded will cover almost everyone.
for those that need more, 32GB cards are not that expensive and get cheaper every year and with the background OS approach, in/external HDD's shouldn't be an issue should the need arise if support wasn't included from the start.