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I saw a super deal where I could get an iPhone 4 8GB for such a small amount that I couldn't resist.
Does someone know if it's possible to change the flash storage for a 16GB or 32GB ?
Would iTunes recognize the device and/or enable me to reset it to default iOS and settings ?
No, it is flash memory soldered onto the main circuit board and cannot be changed. It is not similar to devices with removable/upgradeable storage at all.
In this case "no user-serviceable parts inside" would be pretty close to the truth. iFixit has a great iPhone 4S tear down if you'd like a complete tour of the internals. They have done the same to many devices if you explore a bit, very interesting.
The flash memory is a BGA surface mount package, and is not something you could manage even if you were proficient with a soldering iron. A hot air reflow workstation would be required, along with a few other specialized tools for working with replacement and repair of BGA devices.
Even if you made the change, it's possible it wouldn't be recognized by the device, and if they are storing configuration information in the flash you may need to get a copy of someone else's 64GB flash to be successful.
It's something very few electronics professionals would attempt, and it would certainly cost them more than $200 in time and effort, assuming they already had the tools to perform the work.
No there is not hard drive nor a removable SSD or even a removable flash drive. It is all integrated into the circuit board as noted in iFixit's teardown for the iPhone 4. However it is possible to swap the entire board out, but that would probably not be practical unless you could get one for cheap.
As noted on iFixit, the largest chip pictured below with Samsung written on it is the flash storage for the iPhone.
I'm sure it's possible people did it with iPods up to like 360 gb
