You'll need an external SATA hard drive enclosure. They cost about $17.00 on eBay or you can find one at BestBuy. Put the new drive in the enclosure and format it with Disk Tools and set it one partition. Download http://www.shirt-pocket.com/SuperDuper/S... This is a great little program and it’s free. I bought the upgrade, I thought so much of it, and it’s a lot faster. Run the SuperDuper and then switch out the hard drives. Now you can use the old drive, if it is still good as a Time Machine backup.
As for a new drive I really like the Western Digital 320 GIG Scorpio Black, it's faster, I've had no problems with them and they are under $100.