(Sorry, haven't been here in awhile and I messed up the log in process.. and I can't figure out how to delete my last post.)
I sat in on a Seagate talk over the summer, and magnetic hard disks are not going away. I can't remember exact densities, but I do remember some of the techology that they're working on.
First consider the current disk layout. The head flies over the platter and looks for magnetic fluctuations that represent data. For example the head would read a + then the platter rotates a bit and then it reads a - and interprets that.
Once they can't shrink the distance between the +/-0 areas (there's a simple key term for that I'm forgetting) they're going to be putting the fluctuations perpendicular to the platter which means that I think they have to read the top and bottom of the platter at the same place which I think would increase densities but also half the number of surfaces. It just occurred to me that I'm not sure how they're going to be able to position the arm so that it lines up on the top and the bottom. Perhaps seperate actuators for the top and bottom of the platter?
After that when densities get really high, they're going to start using lasers. As I understand it, they're going to heat the platter right by the head with the laser so that the platter expands slightly. This allows the head to more easily read the data as the laser is more accurate than the head but the laser can't read magnetic data. With the area expanded, the head can then read the desired data.
So yes, they've still got several orders of magnitude to go. I'm not too familiar with the ATA bus though; I don't know if they'll run out of bits to represent sectors by then. Hopefully we'll be past 512 bytes per sector before too long.