Well, I installed 1 120GB SATA drive into the PS3. (Pictures of the upgrade to follow later)
It was actually easier and quicker than upgrading a hard drive on a PC.
Step 1.) Buy 1 x $100 2.5" 120GB SATA Laptop Drive
Step 2.) Attach external FAT32 USB Harddrive to PS3
Step 3.) Use built int PS3 XMB Backup Utility to backup entire system (downloaded games, images and non-copyright protected videos and PS1/PS2 game saves are all backed up)
Step 4.) Power down PS3 and remove current internal harddrive following the steps on page 17 of the manual (it involves, opening a face plate, undoing a set screw, pulling out the drive tray and undoing 4 screws)
Step 5.) Attache new hard drive to tray, and snap back inplace - replace set screw and clip face plate back on.
Step 6.) Power up PS3, and follow in screen prompts to format new drive and re-initialize system.
Step 7.) Use the XMB PS3 Restore Utility to restore the backed up data to your newly installed.
Step 8.) Enjoy your 111GB of usable space
I am still trying to figure out how to back up my XBox360 data, let alone try actually install a bigger hard drive.
Sony are the masters of Consumer Electronics...
BTW, does the XBox360 even support USB harddrives?