Honestly- when I purchase a digital copy of something I don't want to have to pay MORE MONEY FOR ANOTHER FLASH DRIVE FOR IT. I don't care if SD cards are the new memory card, I shouldn't have to pay more for it.
As typed previously, there are always auxiliary/secondary costs between physical and digital copies. It's all about figuring out what costs are more acceptable than others.
I hope the internal storage is only 2gb so Ian can do an epic rant.
I'm already running on the assumption that whatever storage the Wii U will have out of the box, it will be inadequate for the needs of the video game enthusiast. Well, at least for the needs of an enthusiast who plans to own their entire collection of games digitally. I wait anxiously on how easy or hard Nintendo will make expanding storage for the Wii U. Given the unexpected and pleasant surprise of Nintendo's commitment to having most of their games available physically and digitally on the day of the release, my best hope is that the Wii U will have an empty 2.5" SATA slot ready to receive nearly any laptop drive to be formatted and be put to use. The nightmare or "Nintendo 'Nintendo-ing' it" scenario would have the final Wii U hardware axing the USB HDD solution with Nintendo expecting me to invest in high capacity SD cards.
It's hard to guess what the will be needed in the future, but it is hard to imagine one where a Wii U with one terabyte or even 500 gigabytes of storage is the optimal recommendation. Video will not account for any hard drive space as streaming is already the predominant choice as opposed to downloading a local copy. There is the possibility of many home movies and such. Unless you plan on having a 24+ hour jukebox and slideshow, music and images shouldn't take up more than one, two, or three dozen gigabytes.
That leaves video games. Now, I have 40+ games installed on a desktop computer that take around 250-300 GB of storage. Keep in mind that the very pretty PC games have their data uncompressed for faster loading (at least I think that's how it works) and have higher quality assets (so PC gamers can show off). Digital copies of games for the Wii U ought to be much more storage efficient than PC games. Barring strange things happening, 120-180 GB or maybe even less should be barely adequate amount of storage for the life of the Wii U.
Well, unless there will be 20+ must-have games on the system that are 12-25 GB behemoths. If the PS4 and Xbox 3 end up using Blu-Ray (or equivalent) with games filling up those discs, then that could be a possibility (assuming you only want them as a digital copy).