120GB HDDs from the usual suspects ie. Seagate, WD, Maxtor do seem to have the widest Xbox compatibilty reports so it's always a good capacity to go for if you're not looking for huge amounts of storage.
That price is very cheap. You can't get a clean pull 40GB IDE HDD in the UK for much under £10($15) and 120GB -160GB ones are £15 ($23) at best.
I've never been quite sure what 'refurbished' means in regards to HDDs - I suspect it just means it's been wiped, given a cursory check it works and possibly reformatted. Could have bad sectors or have been flogged to the point of death - look at the two reports from previous buyers on the page you linked too.