8 megapixels is better than 5 megapixels. Since phone cameras don't yet come with optical zoom, the only way to enlarge and clip an image is to lose resolution. I do a lot of zooming and I'd rather start from a higher resolution. Maybe I'm in the tiny minority here.
The Mot Droid X comes with 8 gigs internal and a 16 gig microSD card. Right out of the box, it kicks the Nexus S's ess. And if you replace that 16 with a 32, you're talking 40 gigs of storage. Hoo boy.
I still haven't been able to replace my 80 gig iPod. If the S had come with 32 internal plus a slot, that would bring it closer to solving that problem. If the S had come with an SDXC slot (backward compatible but will handle up to 2 terabyte cards!!!) then I would call it the world's most advanced phone.
I guess Google is pushing for a more cloud-based experience on the handheld, which of course means local storage becomes less important. But in reality, local storage is still critical, and I'll bet that the masses will go for the expandability option, other features being equal.