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Originally Posted by Sepharite
I'm wondering, is it possible for Nintendo to create a larger capacity card without having to upgrade the DS?
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Yes,
In fact they are working on it.
This happens with all cartrige based systems, notably the GBA.
x999x talked briefly about this isssue shortly after launch.
Keep in mind many games are done on the 64MB (512Mb cards), so once the cost comes down the more developers will be using the 1Gb cards.