Actually that rumour sounds plausible as it's just a simple storage upgrade and it is a fair concern to have seeing as how some games couldn't even fit onto the onboard 32GB. I doubt they will change the rest of the hardware so early in the life of the platform.
No, I was referring to downloaded games that are so big that they required an SD card.
Dragon Quest Heroes I & II – 32 GB
No matter how much storage they add, it's not going into hundreds of GBs or TB. Doesn't make sense for Nintendo to add storage on board when it's cheaper to just buy microSD. What they need is tools for users to manage the SD cards, maybe let them swap cards as needed, so you store a few games on one card, a few others on another card.
And definitely it needs tools for backing up saved files. A save file from NBA (5GB) is bigger than the whole game of Mario Odyssey. And worse is that save file cannot be moved, so you are stuck with that occupying on board storage.
Users need to know that when buying a Switch, it is mandatory to buy an SD card. Perhaps it will be easier if Nintendo remove the on board storage altogether

(putting save files on SD as well).
That title is mostly a Japanese region problem because square enix hate $.
The problem is usually due to things like audio file size, pre-rendered cutscene file size. Many Switch games now contain multiple languages (instead of having diff version, selling one language only on a countries store), thus multiple audio files, which take up extra space.
And it's also a decision between compressing them or keeping them uncompressed. Compressing means the game size will be smaller, but the Switch has to do more work during loading. This is very clear in the Rayman game, which has super long loading time on Switch but zero load time on ps4/xbox. It's believed that the lengthy loading is due to the Switch having to decompress while loading. It's a double-edged sword -- take up more storage or take up more processing. Unfortunately for the Switch it is short on both. Forza can be over 100GB (due to 4k texture and such) and that's no really a problem on the xbox, but can you imagine even a typical 40GB-ish AAA game on the Switch? The Switch is doing HD/1080p, that's the sort of size it has to deal with. Do you compress the files, so a 40GB becomes 10GB on the Switch but you will have to endure long loading all the time? Or do you want to use up 40GB storage for better gameplay experience?