I happen to both stream video wirelessly (from my PC and NAS) and I also put in a honkin' (ok, not THAT honkin') 120 GB drive in my XBOX.
Wireless video can be tricky and performance can depend on a lot of factors, like the distance between your router and access point and even the configuration of your apartment/house. I use a D-Link DI-634 router (the MIMO one) for excellent range and good performance. I couple that with the D-Link G820 game adapter attached to the XBOX. Both ends support a 108 Mbs connection (about double the standard wireless G speed), and though I don't know if I get that kind of performance in real life I can tell you that I have had little to no trouble playing video wirelessly between my PC/router downstairs and XBox in my bedroom upstairs. 98% of the time files play smoothly with no issues. The NAS itself is not wireless - it is connected directly to my router.
As for the honkin' hard drive, look earlier in this thread - I posted a link that shows you how to do it. The hard drives you can use are not really special - they are regular, off the shelf hard drives. The catch is they have to be "lockable", meaning they can be prepped in such a way that the XBOX will recognize it. Here's a link that will allow you to search for lockable drives - you can look in your Sunday circular and see if any of the drives on sale can be locked:http://xboxdrives.x-pec.com/?p=list
Also, as mentioned, if you want to put in a drive greater than 137 GB extra prep work is required. However, the links I posted earlier will show you how to do that too. If you don't want to bother, just get a 120GB hard drive.
If I, probably the most tool-impaired person on the planet (Home Depot might as well be Abu Dhabi to me) can swap an XBOX hard drive, I assure you that you can too.
Just take the time to read and learn.