@realadain12 Lets clarify a few different issues:
You can use either a 2.5" or a 3.5" drive. Ideally you want a 3.5" drive. If you go with a 2.5" SSD as an example you would need an adapter frame to convert the size difference as the system is expecting a 3.5" drive.
As to drives I would go with a SSHD as it offers more zip than a typical HD. I would go with a Seagate FireCuda as being the best for your system. You could also go with a 2.5" SSD like a Samsung 860 EVO
The reason why these are your best choices here is your system only has a SATA II (3.0 Gb/s) SATA interface so a fixed speed SATA III (6.0 Gb/s) drive won't work reliably! Both of these drives are auto sensing so they match to the systems I/O speed.
Last point is you do need to take the mounted thermal sensor off your old drive and place it on your new drive. Here's the IFIXIT guide you'll need to follow: iMac Intel 20" EMC 2133 and 2210 Hard Drive Replacement
For setup up your Mac OS you are limited to El Capitan 10.11.x. Here's how to create a bootable OS installer drive: How to Create a OS X El Capitan Boot Installer USB Flash Drive. You'll need either a FireWire case to hold your old drive (which I think is a good idea) or you'll need a powered SATA to USB adapter like: Universal Drive Adapter. Unlike 2.5" laptop drives desktop drive pull more power which is why it needs to be a powered unit. So at the end of the fresh OS install from the USB installer it will ask you if you want to migrate and user, apps or data. This is the you want to connect your old drive externally to your system so you can bring all of your stuff over. Once done thats it! Just keep in mind a USB connection is much slower than a FireWire connection so if you have a very full drive it could take a while.