You do realize the reason the switch is a viable portable is BECAUSE it doesn't have a standard hard disk drive or blu-ray reader? Such hardware would needlessly bulk up the device, and it wouldn't really be a portable anymore. For capacity in a small form factor, cartridges and sdcards are the only viable option.
32GB is hardly pathetic, it's pretty much industry standard. Even high end $600 phones typically start at 32GB, and with those you don't have the option to purchase apps on cartridges. I'd rather pay $300 for a switch and $60 for a 128GB sd than pay $350 for a switch with 128GB of base storage.
As I see it, there is a reason for every design decision involved in the switch. It wouldn't have worked with a disc based system, period. It wouldn't have worked with a hard disk drive either. While you might fantasize about the idea of a 512GB base nvme SSD storage, I don't think the switch would work with the required $500 MSRP to sustain such hardware.
Edit: And one other thought. While you might balk at the storage size of the switch, I balk at the fact that modern xbox and playstation consoles still ship with hard disk drives. SSD are incredibly cheap. There is no excuse to be selling brand new revised consoles and still cripple them by giving them hard disk based storage.
Realistically, I figure I'll have one big "AAA" title game I want to play at a time, which will be inserted as a cartridge. If I want to carry a few other cartridges around, it's still going to be a more portable package than any other console. And if I want to have a variety of virtual console games and smallish retro style games, hundreds will easily fit on the base storage. If all that isn't enough, I can use a fairly cheap 128GB sdcard, or splurge and get a 256GB card if I really want to maximize my portability.
At that point, yes it's a little pricey to add a 256GB sdcard, but you are getting a package that can not be duplicated at all by an xbox or PS4 at any cost.