Yes, the explanation of character growth confuses me. I couldn't fill up 3 mbs of data on me, let alone a computer sprite! Maybe they're using complex models that change over time, and multiple high-res textures, for several characters?
As for SE being great devs, I don't rate them highly. I've limited experience, seeing FFX and Kingdom Hearts on PS2. Ignoring their games and artworks, on a technical level these games are nothing amazing. Hideous jaggies, shimmer, and low erratic framerates abound. The world's haven't been complex either, with expansive AI and character development of NPCs. I've never looked at a SE game and thought 'wow, that's really impressive' at any point. So I personally remain unconvinced that SE are the best people to comment on what can and can't be done in games as indivcative of the acutal limitations of the hardware. Likewise Bethseda. Morrowind was quite groundbreaking in some ways but it's a game that has a poor framerate no matter what machine you run it on. They certainly aren't the world's best engine developers based on that evidence, so I'm not convinced when the say they need a resource that the genre ACTUALLY needs it, or just the Bethseda development team.
I don't really keep a note of developers and equate them to good or bad. I know people rave about Naughty Dog and Criterion (I think that's who they are) but I've never seen their games. The only devs I've been impressed with are Snowblind Studios with BG : DA and CON. As such my take on develop comments is 'okay, that's how you see things, but that doesn't mean your opinion is absolutely right.' There are good devs and bad devs, and even good devs may miss a trick that another team finds. It might be that this need for an HDD for character growth is based on SE's current way of modelling characters, and a different approach can have similar results with much less resources. Perhaps. We don't really know. But I won't take one devs comments, or two devs comments, as proving a case, especially if they don't explain things in a way I can understand.
Is a HDD necessary for expansive games? Some devs say so, but I'll wait for more devs to comment and get some games out before I accept that as fact. I've always been impressed by how much can be squeezed out of current gen and I won't put it past some smart people to find ways to achieve amazing things even without the resources one would assume would be needed.