I passed my 4 gig iPhone to my wife. She has an adequate amount of music, several hundred photos, a few applications and 1.4 gig of free space.
I think 4 gig is more than enough for many users, but the cost differential between 4 and 8 gig should be $50 at the most - given the $100 difference between 8 and 16 gigs.
Four gig in current form - $149? Does anyone see that? I am a little doubtful.
Maybe I'm raising some messed-up kids, but 4GB isn't even enough for our 6 & 4 year old. It would be barely enough for their Pixar anthology, never mind all the other stuff. I'm not even sure my 70-yr old father - currently buying his first iPod, a Touch - is going to be alright with 8GB now that I've shown him YouTube's repository of old lounge singer videos.
The times are changing - video has gone portable - and with things like the Flip MinoHD it's only going to get more so.
IMO if it has a (real) screen 8GB is now the new frustration-avoiding minimum.