Beyond just the storage constraints, there are performance concerns with the 256GB model [1]. At least with the 13" M2 MBP Apple has switched to using 256GB SSD NAND chips which means that anything less than 512GB has only a single channel of flash to read and write from. It's unclear if the new Air will have this same constraint but it's something to consider.
It's almost half the speed of the old base model. I think most consumers don't understand how much drive speed effects performance. The cpu is waiting around for the drive most of the time. So this feels like a major downgrade for the base model.
[1] https://www.macrumors.com/2022/07/01/m2-macbook-pro-slower-t...