Hello
1. Yes, but you will
void the warranty. You might get your console 'banned' as well of Live.
2. There is a video on Youtube
http://www.youtube.com/watch?v=F6qV3EiuaHI.
3. No, its a SATA drive, any 2.5 will do. I like Seagate myself.
4. I believe the BIOS only supports up to 120 GIG. I wouldnt try anything larger.
Frankly its really not worth it. You end up spending more in the long run. I would either save up for a Premium or buy it used off Ebay