All depends on what you want.
At the moment, I personally don't really think there's much need for 120GB (& I have an Elite, lol).
Although MS have launched a movie download service (Xbox Live Video Marketplace), the movies are all for rental only, & the DRM means you only have them for a short period of time. So no need for megaspace there.
Game saves don't take lots of space.
Demos & trailers can be big... but they're not something you need to keep, 'cos surely you just delete them after you have played the demo or watched the trailer.
Xbox Live Arcade games... not sure of the current size limit on them, but I think the 20GB drive is probably big enough for plenty.
NB: the 20GB drive actually has around 14GB usable space, & the 120GB drive 114GB usable space, due to reserved space for game caching & Xbox backwards compatability software etc.
I traded my launch-day Premium in for an Elite more for the hope of increased reliability (this was just before they also changed the board in the Premium & Core/Arcade) & decreased noise, than for HDD space. Oh, & 'cos it's black

[Goes better with the TV & SkyHD box lol]. Actually wish I had waited... could have got an Elite with "Falcon" instead of "Zephyr", for less money.
And yes, the Premium is a great buy
---------- Post added at 22:42 ---------- Previous post was at 22:35 ----------
Oh, if you have an HDTV, & have a surround sound amp with optical in, then I'd actually recommend getting the official MS HDMI cable (or, depending on price difference, paying a bit more & getting an Elite).
Although normally I'd say "buy a cheap HDMI cable, expensive ones are a pointless rip-off!", the problem with the 360 is that if you want to use HDMI *and* optical audio out you need a special MS optical audio dongle, which comes with the official HDMI cable, and is also bundled with the Elite. [you could use the bundled component cable to give you an optical audio out, -but- the plug blocks the HDMI port. The optical audio dongle is slimmer so can be used at the same time as HDMI. Or... you can apparently butcher a 360 component lead to just have the optical audio output & no big fat plug]