I'm not completely certain, as I can't seem to find an answer anywhere, but I believe it may have something to do with the size of the removable device. Back in the day, 70GB was large, but nowadays, you can find USB Flash Drives larger than that.
If that's not the reason Windows calls it a removable device, it also might have to do with the USB housing, although I doubt it. Either way, does it really matter much? You can still access your hard drive just as well, and in 7 you have the option of ejecting the device from the Explorer menu whereas you can no longer eject from Explorer with regular external HDDs.