I don't find the two positions I see being advocated here mutually exclusive.
I agree with Fife and Drum here. As Turnea indicated, exaggeration (or bias for that matter) indicates that there was an intent to mislead. I don't believe there was any in this case. The media reported the information that was given to them, and the enormity of the destruction, from what I've seen on television, is astounding.
The media has (unfortunately) a stake in "sexing up" the story (to borrow a British term). In additional to mundane sensationalism, there is fierce competition amongst the various media sources to "one-up" each other, creating an even more out of whack scenario.
Given what seems to have actually happened, I don't really think the media has sensationalized this as much as they usually do. Basically, it was sensational all by itself...no additional jazzing up was necessary. However, anyone who doubts that sensationalizing isn't SOP for media outlets is woefully naive, IMHO. So, while the term 'greatest natural disaster in US history' does so far seem to be appropriate, don't doubt that the media will do whatever it can to heighten such feelings whenever possible. I will say, though, that so far I have been pretty impressed with the lack of such so far. To me, the press has functioned so far as I think it should...reporting on what has happened or is happening with a minimum of bias or agenda.
The range of the destruction and New Orleans is a very famous city. This is certainly the most costly hurricane in terms of dollars, and probably the most powerful to hit our nation. If we are going by lives lost, it doesn't come close to the Galveston hurricane of 1900, which was the deadliest, killing from 8,000 to 12,000 people. For that I think we should be thankful.
I think this should be viewed relatively. Galveston was almost completely wiped out in this disaster, and was a little larger than Houston at the time. It was relatively a much larger city then....maybe similar in relative size to other large cities as NOLA is now. So, when comparing the two, consider the impact if something similar had happened in NOLA, with essentially 80-90% of the original population killed. That would be a death toll in the hundreds of thousands, although the geographic scope of the event was certainly much smaller. It does show, though, why ever since then, evacuation has been an established course of action when large hurricanes are forecast.