Apple should have known going into this that the diehard music lovers that buy the nano are going to need way more than 4GB of memory. 200GB of storage sounds a little more acceptable for the diehard music lover like myself. There is a nice step-by-step tutorial over at Uncyclopedia showing how to complete this task. Unfortunately the battery life for the nano lasts around six minutes, so that could hinder utilizing the full 200GB disk size.
iPod nano 200gb instructions [Uncyclopedia]