You don't want 120GB hard drive in it because, well, it's a hard drive. The reason they use flash memory in iPhone instead is because it's resistant to shocks, so you can drop it every now and then. Imagine dropping a hard drive in working state. There goes your iPhone... Or iPod, for that matter. Statistically, phones are much more likely to be dropped than MP3 players, hence they used flash memory for those. The largest (and insanely expensive) flash memory stick I've seen so far was 64GB.
On the bright side, flash memory is generally faster for some operations than today's hard drives (not that it makes much difference for something like an iPod). The down side is that flash memory has a limited number of writes. It seems like a lot (a few million), but if you consider that something like an iPhone has a scaled down desktop operating system in it, which means constant read and write operations to the disk... Don't expect to use it for much longer than the warranty :) Of course, by then there will be i-something else, so you'll just "have to" upgrade, anyway :)
The usuals, whatever I post is my opinion, yaddayaddayadda. I'm still learning this, so if you listen to me, well, good luck to you :)
