Obviously a killer idea - if it's not an April Fool's prank. More interestingly, it's a great, and easily quantifiable example of value creation. Here's a rough take:
Google's estimate is $2/user for storage etc. Let's assume there's hidden costs of an additional $2, for a total of $4/user. Now the life of a mailbox is related to it's capacity - the smaller it is, the faster it fills up, and the more useless it becomes. This is a nonlinear relationship, but this simple causality is ok for now. How much is it worth to you to have a mailbox that has an exponentially longer life? Clearly, as much as it reduces search costs for others to find you (which is the basis of the switching costs that keep people tied to email addresses). Is this amount greater than $4? Clearly, it's probably far bigger than $4 - unless everyone you know's time is worth next to nothing. How can Google monetize the difference? Advertising - obviously - will capture it (and maybe even more, because the life of the resource is nonlinearly related to value captured, but that's another topic).
The interesting bit is not that Yahoo hasn't done this - it's that Yahoo can't
do it - because it hasn't got the resource necessary to transform users into cashflow (AdSense). So the lesson is that bad strategies lock you out of good ones - strategy is heavily path-dependent - and Yahoo's inability to compete with Google on this is a great example.
It's also interesting to note that Yahoo's strategy head is an ex-strat consultant, as is Google's - but Google's is more plugged into the academic circuit, and so Google tries a lot of unorthodox stuff, and more importantly, actually tries to build new business models and dominant designs, unlike Yahoo, who's focused on imitation and horizontal expansion (this is why Kelkoo was such a bad idea - the opportunity cost was very high: it was essentially giving up pursuing radical innovation).