I have just installes a 1.5TB sata in my machine and found problems installing windows 7 to.
The bios recognised it as did windows 7 setup after refreshing a few times however it would not allow me to install to the disk. after some painful searching and installings i found my resolve was that you cannot install to the drive, I bypassed this by installing a smaller capable drive >250GB (i used a 40GB) installed windows to this drive, let it find the drivers via windows update (possibly not necessary but it harms nothing. download the drivers only!, keep the install size down) back up the entire partition using acronis trueimage (check in the advanced section and set the compression level to maximum), making an acronis true image recovery boot disk. then you can either copy the acronis backup image to a dvd or a usb stick (I used a 4GB memory stick,and had plenty spare).
swop out the HDD and install only the 1tb disk. Boot from the Acronis recovery boot disk and restore the partition onto the 1TB from where you stored it. when its finnished reboot and you will be fine.
For graphics i would recommend a radeon HD 4350 Passive, low profile card *one with SVIDEO out* if using an analogue (TV) display, not all of them do, some have HDMI (High Definition) instead of SVIDEO, Check!. I just got one for £20 + P&P
One problem with this is it will disable the SCART sockets at the rear, there is NO workaround for this, they are only activated by using the original PCI-E card that is installed as its a custom card.
Not a problem for me using a HDTV but may inconvenience yourself. I personally dont understand why you would need to upgrade the VGA card, i have found it *supprisingly* powerful enogh to play HD movies, if the problems are due to a resoloution issue, i would suggest a software approach to alter the resoloution and aspect ratio of the picture. google powerstrip + "display resoloution"
Hope this helps