To be honest I'd assume there'd be 2TB expansion card models at launch (assuming this doesn't divert a huge amount from an NVMe drive) and larger over the years, people would definitely pay for it, then you're still talking like 20ish games at 150GB per title that you could instantly launch and then more "nearby" on external storage. But it makes sense to only allow drives within their minimum performance targets at least, which I assume is the main point of this, especially if they're expecting titles to use it as fallback from main memory quite a lot.
But to be honest, both consoles launched with only 500GB models and very limited external support, so it could be worse.