I have 4644 tracks on my Samsung Focus 39.6-gb install, and still have 8.08gb of "available storage" per the phone About screen, and 7.2 "FREE" per the Zune Phone screen -not sure nor worried about the differing opinions. ;) About 90 percent of my collection consists of 192kpps-ZunePass downloads, and I only have about 50 photos and 50 apps loaded/installed.
I haven't noticed any "lag" as my collection has grown, but I started with >3000 tracks right after I installed the 32gb card the first week I got the phone in August.
Disclaimer: I am not speed-Focused -pun intended; so if my apps open in 1 second instead of .5, I probably wouldn't notice. ;)