I don’t do physical gaming, as someone who has spent nearly a decade in shelling out the extra dough for storage on portable/mobile platforms, here are my thoughts:

200GB flash drives are often cheap, probably a lot cheaper than the difference a Switch with a larger internal storage would cost. I don’t see Nintendo putting a 256GB internal storage sku on the market for any less than 36% more than the base model, probably closer to 50% higher. Cheaper options might be enabling hard drives on docks or adding docks with hard drives, but that doesn’t fix issues with the majority of users who use it as a portable.

A 200GB card is not bad at all, especially with highly competitively priced options.

Nintendo made a platform. 3rd parties have no need to publish a single game on the system. Them producing a game on the system is because they see profit in doing so.

Nintendo could offer to pay for the extra costs of a cartridge, but have no need to. The only reason to do so would be to entice a 3rd party over. But whether enticed or not, the 3rd party still woudl come down to whether bringing said game will bring profits or not.

Nintendo didn't decide on teh games size. That was the publisher of said game. Nintendo has many games that fit on the smallest cheapest cartridge. They also let the Switch accept much larger cartridges too. If Nintendo was being bad, they woudl limit the switch in reading only 8gb or smaller cartridges. The system allows at least up to 32gb. I don't know if more or not. Hell, their micro sd slot reads up to 2 tb or something, a number which doesn't even exist yet, so would not be surprised if you could use carts up to 64gb.

And do gamers prefer carts over cd or other formats? For a system that is portable, damn yes we do. CD's or other rotating formats are horrible for something that moves. And do gamers want portability? Damn yes we do. A recent data sheet showed like 80% of Switch owners use their portability.

32 GB games are stupid expensive. No game uses it except for Dragon Heroes 1 & 2 and that game was $90 I believe. Also I believe Nintendo is already eating the costs of the cartridges. Honestly this problem was a thing on the 3DS back in 2011. Eventually the cartridges' price will go down and everyone will use 32GB cards. So we will have to deal with it for a year or so.

Below is a quote from another thread.

So a 32GB cart costs $10 more than a blu ray.

Fun Fact: LA Noire costs $10 more on teh switch than on PS4/One, yet is only using the 16gb cart. So they are making like $7-8 profit on charging more with the excuse of Carts cost more.

It’s like the N64 all over again, when certain games cost 2-3X as much as PSX games.

Hmm I can't agree with that. Third parties don't lose out much on not releasing on Nintendo platforms. They're not a charity, they're a business. If the costs are higher for them due to the SD cards, than that's Nintendos fault for not looking into the situation before hand. This isn't the first time Nintendo's done this either. They did it with the N64, The GC, and now the Switch. It's unfair for third parties to simply shell out money for a system that will sell less software units than the PS4. Something that sells 1million on PS4, might do 500k on Switch. So why would any third party shell out the extra money? They don't lose anything by not releasing on a platform, the platform holders lose out. 

It could be a good solution but not sure it would solve most issues on the size management.

Well a lot of people like us don't care about HH, but some love them =]

Yep I really don't think Switch would be a success if it was a home console instead of a HH that can be connected to the TV.

And where do you want to put this inside the Switch? M.2 and U.2 Formats might fit, but still would need some serious internal redesign for this. Besides, even the cheapest SSDs of that size cost about half as much as an entire Switch console, so this would push the price even above the PS4 Pro.