Another Dell Dimension 8200 internal HD question

I have a Dell Dimension 8200 with an internal 120 GB HD (where my C drive lives), and internal 250 GB HD, and an external 320 GB HD (using IEEE1394 connection) which I use for selective back-up. I do a lot of video editing and need more space but I want to move to a larger internal HD. I was told at my local computer store that my system might have trouble recognizing larger drives. My questions are:

1. Can I upgrade to a 750 GB internal drive? (i.e. is this a problem for a Dimension 8200?)
2. Could I upgrade the currently 120 GB to a 750 GB drive and use it as my C-drive (from which my system boots up) or does this create specific problems? Because it is my smallest drive it is most tempting to upgrade this drive.
3. Could the Dimension 8200 handle a 1TB external drive?

I live in Japan and 750 GB internal drives or 1 TB external drives go for the equivalent of around $500-$600 here.

Thanks in advance for the help.

Stewart