If you buy the Galaxy S III 32 GB you get 32 GB of internal memory, I realize that you're worried about getting perhaps 16 GB internal + 16 GB SD-card but that is absolutely not the case, and it would be pretty much false advertising and they would piss a lot of people off. I just looked up the specs and it is indeed 32 GB internal memory for the 32 GB variant.
I don't know how specifically the partitions are set up since i have a Galaxy Nexus myself, but I wouldn't be surprised if it's the exact same, where /sdcard
is a separate partition but still on the internal memory physically.
So, to answer your question:
Is the device storage an extension of the primary device memory, or is it treated as a separate memory area that can only be used for data storage
No, the device storage is not an extension of the primary memory as far as I know, it's all internal flash memory albeit still partitioned to standard Android partitions for obvious reasons, where /sdcard
is one of those standard partitions even when no actual sdcard is present. So as far as I understand, you'll have 32 GB of pure internal storage.