I don't know all of the technical legal arguments, but I do know that it's legal to back up your own games on the hard drive. It's legal to buy a modchip as long as the store you buy it from doesn't ship it with a BIOS compiled with MS code - it will most likely be shipped with a Linux based BIOS called Cromwell.
crazyjeet - with the LBA48 patch, hard drives can be supported up to 2.2 terabytes. They don't even make HDDs that big yet
As long as the drives are IDE it should work.
sew3521 - Don't know 100 percent, but I would guess that the answer is no.