I agree they are more likely to share external storage, but I disagree about them getting smaller.
with virtualization, the average machine size is getting significantly larger (while the resources allocated to an individual VM are significantly smaller than what an individual machine used to be)
there is a significant per-physical-machine overhead in terms of cabling, connectivity, management, and fragmentation of resources. In addition, the sweet spot of price/performance keep climbing.
as a result, the machines are getting larger.
for what you are saying to be true, a company would have to buy in to SAN without also buying in to VMs, and I think the number of companies making that particular combination of choices is rather small.
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