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More internal space and thus faster loading times would only mean faster loading times. UE3 games wouldn't have texture loading issues like in the Batman Arkham games. That's it.

There's as well no need for more VRAM*, the GPU wouldn't benefit from it. But more main RAM would've been useful to load more data at once and have less reloads. Having 1.5-2GB free for games would have been great. And 1.5 should be possible if Nintendo got the memory footprint of the OS dowwn.

*Unified RAM, though it seems like up to 512MB is used for graphics.