I don't disagree, but I think the $399 version might be their undoing. 64GB is about 1 AAA game, and 0 in some cases. So people are going to get this one for their kids for Christmas, the kids are going to say it's shit, and it's going to get a bad reputation, even if the high end models are good.
Maybe they have solutions lined up for the problems that will come with low/slow storage, but we'll see!
The Switch has had the same problem, which causes me to basically never keep AAA games installed for long, but they are still quite successful.
The Switch also tops out at 64GB with the new OLED model, whereas that's the starting point for the Steam Deck. There is also a history of consoles being offered with a wide variety of different storage sizes (Xbox 360), and I don't remember that causing any serious problems for them (if you ignore the humongous size of the Xbox dashboard at the end of its lifetime, which is an avoidable problem).
One caveat, at least for me, is that Switch games tend to be designed around cartridge limits, and the transfer speed there isn't too much faster than the Switch's UHS-I SD card reader (although I can't find any tests or specifications on the cartridge port). PC games nowadays tend to be designed around either a SATA-III SSD or a PCI-E SSD (over NVMe), which will be much, much faster than a UHS-I port, so PC games over an SD card won't be anywhere near as performant as a Switch game.
It will be easy enough to hack it to add your own storage. Probably just a screwdriver is needed and you insert your own NVME drive. Everything is standard hw.
Maybe they have solutions lined up for the problems that will come with low/slow storage, but we'll see!