I'm sure MS will release a larger HDD as an expansion. However its also easy to imagine 3rd party companies releasing larger HDD's as well, since they are removable. Also, since they are removable you can assume they wont be "locked" like the current gen XBOX HDD, which means we "MAY" be able to crack open the case that holds the drive and install an off the shelf 2.5" HDD the size we want.
The DVD Drive that comes standard with the 360 will be either IDE or SATA, once again an off the shelf product. So I'm willing to bet we could easily replace it as well.
The sticking points for me are the RAM and the OS.
People seem to love Linux, however its practical uses for the average person are limited right now. So unless MS releases a version of WinXP or Longhorn for the 360, I cant see me bothering to run Linux.
The RAM on the other hand, 512MB isn't bad, but I would love to upgrade to at least 1GB. But, ONLY if I could run a OS other then Linux on the 360.