That's a pretty big range. 5K is somewhat more plausible than 120k, for longer term.

5K can fit in a 100 megabit connection and require something like a large hard drive a month to store the blockchain. Not going to be home-based nodes at that point but it could still fit easily within satoshi's vision of many independent nodes in data centers, even small data centers (10 years is only 100 hard drives -- not really much a storage array). Ignoring future improvements in storage technology which I think is ArticMine's point.

Considering a peak 60x higher means you would need 6 gigabit connections, also plausible for a small-ish data center. As long as the peak isn't sustained too long, storage wouldn't become a problem, and verification can be almost arbitrarily parallelized.

I agree with your main point about there being better ways to scale than jamming everything into one chain though.

Small point: The block size can't grow at all without some penalty. Despite what the white paper says the penalty kicks in at the median size, not 10% above the median. The implementation has always worked that way.