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Extra storage is cheap. You might take a once in a lifetime shot one day, one that cannot be repeated by changing your settings to maximum res and pressing the shutter again.
I shoot in RAW mode which is like a 16 bit digital negative straight from the sensor... you can fiddle with parameters such as colour balance and exposure after the shot is taken. The file sizes are larger than jpeg (about 7-8Mb per shot for a 300D) but it's definitely worth it. There is so much more room for manipulation.
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