The only games that even approach 25gb+ are MMO's with several expansions already released. The average game these days takes up around 8gb-12gb at MOST. 16gb flash drives are are around $10 now and if they are to be mass produced as a distribution media they'll become even cheaper.
I'm thinking the next gen game sizes would be around 30-50GB mark. Games now are larger than 4GB.
I would prefer it to be write only and each game is sold on its own separate drive and run from that drive. Thus you avoid the finite number of writes and save any changing files/updates etc to the internal drive on the console. Most of your issues can be solved by distributing them in the same fashion as discs (except that they are more reliable and read faster which means faster load times). The only true statement is the expense, but flash drives will become cheaper and that is inevitable. Less than $10 for the media required to hold practically any normal game that has been released in the last 4 years or will be released in the next 2-3 is pretty good so far.
No its not?
Most games are still sold retail but have the option of downloading them digitally. Just like the 360/PS3 has now, games sold in shops but also on the Market for the people who can take advantage of it.
As for flash don't make me laugh, there are four problems.
One, NAND is far more expensive than pressing a disc.
Two, NAND has a finite amount of read/write cycles it wont last more than a few years constantly rewriting games onto it.
Three, Security concerns, if you allow a user to read and write games to the drive its a MASSIVE weak point for security, eventually people could spoof a drive and boom you made it super simple to copy games.
Four, the logistics of having a machine in the stores that a) has the security/encryption, b) has access to the internet to get all the latest releases, c) whos going to pay for the machine, microsoft or the stores?
Flash and digital download only is a pipe dream, by the time it does happen we wont be playing on 'consoles', we will be streaming games over the internet to any device.
This would also eliminate the need for an optical drive, allowing for the "super slim" form factor that may be desired next generation.