Installing a hard drive should be fairly simple. Remove the two retaining screws, and you should have access to your hard drive. Now if you do decide to change the hard drive out, you will need to keep the hard drive caddy/assembly to install on the new drive.
Any standard 2.5 IDE hard drive should work, with speeds ranging from 4200rpm to 7200rpm. The size is a personal thing, but I would at least opt for 80GB or more.