Cloudy with a chance of meatballs!
The problem I have with 'cloud' computing is that the cloud is not always available. I work in a corporate environment and also do a lot of travel to locations where public or private wifi is not available. In the UK (for example) there are large swathes of the countryside where you won't get an EDGE network, let alone 3G. I also travel to countries where 3G is not an option as well as buildings where you get no phone signal (like Datacenters and basements).
The upshot is that I love the MBA (I'm still using 1st gen 80GB HDD but considering an upgrade shortly). It is light and portable and does exactly what I want it to. However, emails and documents NEED to be available at all times. Therefore, they need to be offline, not stored in Gmail or Yahoo or MobileMe or any other internet based system. Dropbox is useful but again, only when I am connected, which is about 25% of the time.
I would question your requirement to have iTunes and iPhoto stores local but if that is what you need to be mobile, then that is your requirement. But ask yourself, how often do I need to change these libraries, and how often do I access ALL the libraries? Can I run with a subset? Can I sync between MBA and external storage/home MAChine?
If you MUST have all you stated above local, then go for the higher storage onboard. Using external drives with a MBA kinda negates the benefits of having a MBA. You might as well use a 13" MBP with 500GB storage and be done with it.
Just my 2p worth.