Here's what happened: after I used the device a bit, it started getting sluggish. I wondered why everyone else was raving about the device. While a factory reset would get it fast again, I really did not enjoy having to reinstall the device every single time. A search for "Nexus 7 slow" didn't return many results, but a search for "Nexus 7 sluggish" granted me a Forum entry, which in turn led to this PSA.
Fundamentally, the 16GB variant of the Nexus 7 ships with defective eMMC packages. That means that if you load up the 16GB variant until there's less than 3GB of storage left, the machine grinds to a quick and sudden halt. Let me describe how slow it is: I could barely factory reset the device because it would not recognize my drawing the unlock pattern in order to do so. I had to reboot the device, and during the window in which the device was still (relatively) responsive, reset the device.
Some people reported that a factory reset sped up the device. Not so for me. I ran Androbench after a reset, and it reported a random write speed of 139 IOPs. (A standard N7 should be capable of 7000+ IOPs)
I called Google support and asked to return the device so my brother could get his money back (it was a birthday gift). Turned out I was 6 days too late. I also could not get the 8GB variant of the device instead, which does not suffer from this problem. The customer rep assured me that this was a rare problem, but given the amount of traffic on the internet about this issue, and a verification with a friend of mine who bought the 16GB Nexus 7 also had the same problem. I'm willing to bet that it's not a rare problem, but just a problem that's so subtle that many customers just live with it, not knowing that the product isn't supposed to be this sucky.
You might wonder why Googlers don't have this problem. It turns out that most Googlers have only the 8GB version of the device, and the folks I spoke to said they mostly used theirs to check e-mail. This is the same reason why Apple didn't find out they had a maps problem --- they didn't actually have any power users on their dogfood list.
I understand that there will be screwups, I understand that no product can be perfect. However, Google's customer service clearly doesn't reflect the reality of the situation, which is the 16GB Nexus 7 is a dud and a defective product from the get-go, and never should have shipped. I am therefore rescinding my "recommended" tag on the Nexus 7 review.
If you want a tablet and need more the 8GB of storage, get a Kindle Fire or an iPad instead. (Frequent readers of this blog are aware of how much it hurts me to recommend an Apple product over an Android product) Google (and Asus) should be ashamed of themselves for foisting off such garbage onto the world.