I've had at least 256GB on my phones for the last couple of generations after having had to deal with storage issues beforehand, and it's been much nicer.

But I picked up a 16e for my son a few months ago, with 128GB, and yes, we're running into issues with storage space when it comes time to do an OS update. Between local music and photos storage, base storage, and the image for the new update, two or three times now we've had to delete stuff temporarily in order to get the update going. So I'm happy the new base is 256GB, at least that will probably last us a couple more generations before ~~640KB~~ 256GB is enough for everyone.