All firmwares upto 2.8 support upto 4GB, firmwares above that support 8GB.
If i were you, or your brother, i would NOT buy the HDD, there are LOTS of compatibility problems.(Especialy if you are running ISO's or Videos.) And its like cliping a tank onto your PSP.
The PSP cant access hard drives pluged into the USB port either, so thats a dead end.
Buy a 4GB memory stick, its what i did, i dunno what i did before i had it.