I had one of the 20GB models until very recently, I had two full games installed (LBP and inFamous) as well as the necessary save data for several others, the lack of memory only got noticeable right at the end. After I had had it for 3 or so years. So, in my opinion, you don't need the extra memory, so unless money is tight, go nuts.
I bought a 250 GB Slim about a year or so ago. In that time, I have filled up 200GB+. I have only around forty left. Make of that what you will.
Truth be told, I do have quite a bit of downloadable's. They fill up a good amount of room; I'd say the more memory the better, however, because in the end your not going to be complaining "God! I have so much memory" but about "Jesus, I've got nothing left! How am I going to keep my save files and downloads?".
If you do go for the 320gb, then look around for the uncharted 3 bundle. Its the same price but you get a free game and 30 days of ps plus. I know that a lot of gamestops still carry them, as well as amazon.
If you're gonna be installing a lot of movies, music, full games, etc, then you'd be better off with the 320. Me personally, I'd stick to the 120. I too intend on buying one at some point.
So I'm going to get a PS3 but the only question is which one? The 160GB or the 320GB?
Is the extra memory really going to matter a whole lot (and for that matter does it warrant the extra $50 for the system)?
Bigger the better, it really does make a difference, especially with the amount of DLC's and digital download games. I have DLC's for every game in my library, plus alot of indie games from the PSNstore including some pretty big games like Siren and Wipeout, which my old console struggled with, but my new console had tripple the amount of memory and I couldn't be more happy that I paid extra.
Yeah, my 120 GB is only using 45GB at the moment. Though i have an external HDD i use for non-game files. Problem is that external HDDs must be FAT32 formated to be used with PS3, which limits it's size to 32GB So i have a PS3 partition on my external HDD, and the remaining ~470 GB are for my PC
Keep in mind that the PS3 uses standard laptop HDDs, not the proprietary garbage that Microsoft uses in the 360. That means you can get a gigantic HDD to replace the stock one with if you ever need to. Just for kicks...
I bought the 160gb version and I don't use that much HDD space at all. I don't download many games though. I stream music and videos through my network so most of what I have in the form of media is on my 2TB HDD. If you have a good network (wired works best though I go all wifi) or you're not going to download a ton of games just go with the smaller version.