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If you're fine opening it up and upgrading the SSD yourself, the only long term difference you're most likely losing is the steam profile that comes with the higher two tiers.
Some people don't feel comfortable doing that, and if you're one of those people then you might want to get the 256. For the sake of shader caches not running you out of internal storage.
As long as you don’t install and keep a ton of games on the SD card you will be fine. The issue that starts to happen is every game installs the shaders to the internal storage so the game runs better. If you install too many games the storage drive will get full.
I think you get 48gb of usable storage and you can install about 15 AAA games before you need to worry. So as long as you delete games after you finish them you will be fine.
Make sure you buy a good SD card like a Sandisk extreme or Samsung pro. Ignore all other SD cards as they have awful write speeds compared to those.
The question is if you need to do this though, maybe a 512GB SD card would already be sufficient. Yes, SD Cards are slower, actually significantly slower in benchmarks compared to the internal SSD, but in the real world it doesn't really make a difference. At least in my use cases.
I'm pretty sure that the cpu is a big bottleneck in the deck and therefore the loading times get slowed by it more by the cpu than by slower storage . I tested warzone, black ops 3, skyrim and dishonored 2 on the internal ssd (on the 256gb model) and then on a SD card. The difference in loading time was... small. A few seconds maybe? I have all my games on the SD card now. And I don't even have an expensive A2 SD card. Just a regular class 10.
The game need a shader cache and that will always get on the internal storage unless you do some messing around. But if you are already messing around you might as well install a bigger ssd.
If you dont want to do that just get the 256gb one.
I've decided I'm going to go with the 256 GB model. I have a 200GB memory card I'll use with it for now and probably pick up a 512GB or 1TB memory card after the holidays.
If you decided to juggle memory cards for your games, I recommend going into the properties for each game on the card and selecting the "Update on Launch" option. Otherwise, every time you swap cards, you'll have to do a bunch of mandatory shader cache downloads for the games on the loaded card.