it seems the 80Gb version can be upgraded
http://www.videohelp....-upgrade-t275512.html
You will often find with questions like that you won't a a firm 100% answer though, it often comes down to try it and see if it works. (You can get 250gb drives for about £30 so it's not a huge risk to take)
I agree with you that a lot of people don't realise how bad the quality of the picture they are watching is, these are normally the same people that insist HD is no better than SD(when often they will have connected a HD source with a scart lead!)