Yes, can replace it with a laptop drive there is some tut on here . use the search bar on right corner of the page Update found this saved in my bookmarks : http://digiex.net/guides-reviews/console-guides/xbox-360-guides/3152-how-hack-250gb-320gb-sata-drive-work-xbox-360-xbox-360-slim.html
Not positive but I believe the highest you can format a HDD for a retail XBOX360 is 320 GB at the moment. I don't think they make a higher one that you can clone the bin file.