I actually find the 20GB small. If you plan only to do XNA development on your 360 then you have plenty of space and no worries. However, I found quickly out that only 12-13GB of the 20GB is available when you receive the machine. The other day I downloaded the Free Halo 3 map pack and it was 500MB!
To put that in perspective, a number of game demos (about 500MB+), a number of map packs and some videos/music and before you know it your drive is full. I can always upgrade, but that would put me a hefty $180 back and the inconvenice of moving all my content over to the new drive (and at the moment the process is not perfect).
So what we should really address is, what else do you plan to use your Xbox 360 for?