They should replace the 120GB models with 160 GB models.. but if they replace it with a 320gb model and keep the price at $299, that's even better.
but I'd like the idea of a 320GB ps3 for $299.. since there are some people that buy a 360 over a ps3 because the 360 is 250gb for the same price (I know it's kinda a weird sense of logic)