I'm not so sure about that. It wouldn't be too expensive for them, not so expensive that they couldn't handle the additional cost without increasing the price*. Considering that you can often find 8 GB cards for little more than $5 and 16 GB for less than $10 on retail nowadays, the hardware itself cannot cost more than $1. M$ buying flash cards in mass from the fabs through closed deals would cost them a lot less and then there would be no need for all the packaging that current games have, which costs money too.
And I honestly think that digital distribution will take over anyway (in PC it's doing it at amazing rates), so they only need to cover demand in those areas where internet connection is slow, so volume for retail sales should be a fraction of what it is today, shrinking every year until it apporaches zero. IF flash cards do indeed cost more it's probably a cost they could swallow during the first years after which the cost of distributing would approach zero too, due to digital taking over. They save up by not including the optical drive too.
* Does anyone really expect prices to stay like they are anyway? I certainly expect "next-gen" games to cost $5 more than they do know, just because they are "next-gen".
PS: I started using Steam when I had 512 Kb/s connection and I didn't die. It took several hours and sometimes a day to download, but nothing happens, really, you stay alive and all is well. Game is the exact same the next day, I promise.