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I don't understand why people think 512gb is a crazy increase.

The original DSi came with 256MB of storage. This was increased to 2GB with the 3DS. Which was increased to 32GB for the Switch (and, later, 64GB with the OLED).

From DSi to 3DS that's a 8x increase in storage capacity. From 3DS to Switch it was a 16x increase (32x increase later with the OLED). 512gb is another 16x increase (or 8x from the OLED). That's perfectly in line with expectations.