You have a couple of options here swapping out your HD for an SSD or swapping out your optical drive for special carrier to mount either a HD or SSD. Or you could swap-out your HD with a larger HD which also could be a hybrid drive (traditional patter HD with a SSD).
As to size there is no limits here as long as the device fits the same space the drive your replacing takes (either a 1 or 2Tb HD or 840MB SSD will work). Your current HD & its connection is SATA II (3 Gb/s). So you will need to watch out on what HD/SSD SATA spec you put in. Either one that is SATA II or can be jumpered down to SATA I/II speed. Straight up SATA III drives are to fast and will cause your system to over head as the CPU has to work harder when trying to read/write as it needs to do a lot of retries. Think of it this way some one is talking to you very quickly and you constantly interrupt him asking him to repeat what he said as you didn't get it the first time.
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The one thing that is important here that you need to do first is to make a backup of your current OS & data on your HD. You also want to get the OS install CD/DVD or in the case of Lion or Mountain Lion the installer file. A good trick here is getting a USB Thumb drive make it bootable and then install on it the L/ML image file so you can then put a fresh copy of OS on to what ever you decide to go with.