Here's the thing though. As a hybrid system Nintendo is caught between a rock and hard place. If you add too much storage the cost will increase which, depending on the features of the system (720p screen, multi touch functionality), could push them to a price point that they aren't comfortable with. A price that could consequentially cripple any potential system sales.
It certainly isn't enough for a standard just plug and play console, but let's be serious there are no such things as plug and play consoles anymore, which is a shame. Plus with carts being used it's less of an issue.
With that being said it seems like Nintendo is looking for players to purchase larger SD cards (which can have of a size of up to 2TB) or use external drives for major digital purchases, which sucks for those who don't have one, but can be easily purchased if you want that convenience.
People jumping to conclusions about Nintendo lacking 3rd parties or not wanting online gaming based on a rumored flash capacity are clearly chicken littles. Let the sky fall first and then we'll know for sure.
This whole Nintendoomed nonsense is overdone. Everyone thought they were screwed for E3 and they wound up blowing everyone out of the water with Zelda. Let them announce first and if it is clear the system will be shit, shout it from the rooftops if you want. I'll meet you up there too.
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