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Don't forget to put blue death screen in that UI. Just kidding mate. 
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It is a UI, not an OS. The days of Windows BSOD are over with Vista & XP SP2 mate.
Just look at W950i, just 4 GB memory but seriously good 15hrs audio playback & about 4 to 5 hrs video playback at that resolution. mav3 is right....u might end up with no battery left when u need to make the call the most
, & Remembar, iPhone doesn't provides user replacable battery just like iPod.
a Phone should be a phone primarely. Having 1 GB storage in a phone is enough. This is the reason I like SE\Nokia multimedia phones. Just 128 or 64 MB Memory, which the user can expand as he requires. He is not forced to pay for 8GB of HD space even if he doesn't need it. He gets some memory to start which he can expand as required.
More flash memory of 16 GB results in huge increse in costs, so that is not an option right now. iPhone should have had 2 models. One with 4 GB Memory, one with only 128 MB memory & Memory card expension.