Storage space and game lentgh are completely unrelated. Dragon Quest for NES is like 200k and it's a 60 hour game. With added storage space we can watch HD movies, store ultra hi-res textures, large soundtracks, etc. The 9gig DVDs are already limiting developers for games like Grand Theft Auto. Big games, detailed worlds just need a lot of space, especially when the next generation of games come out.
So I'm guessing a game like GTA can't be on multiple discs by design. That will certainly be a big issue for GTA 360 then. Is procedural generation a potential solution?