I even had an external 2TB HDD connected to my Wii U because I easily get bored with a game and need to switch out out for another one. I'm juggling 2 128GB SD Cards on my Switch. I have an external 4 TB HDD to my Laptop for my games. Keep in mind I'm mostly playing indie Games which don't use that much space. I just need to switch games often, and to do so, I need enough space for all of them to fit.
So, while I won't buy an Xbox anytime soon (what's the point if you have a gaming PC?), having more space is always useful.
Also, I expect that games grow quite a bit over next gen. Bigger resolutions and bigger screens will also need bigger, more detailed textures, which certainly will bump up the space a notch or two. Add to that the Raytracing, and a 500GB SSD like in the Series S might fill up very quickly in a couple years
So what you are saying is you don't actually need that much space. Dowloading games is fast enough to start the download before you want to play it.
500GB will be plenty for anyone. Any more is luxury, not necessity.
retro gaming. 15 years from now when the online service is dead, can still play your games.