Here's been my upgrade experience
(With a little bit of background info. You can skip to the dotted lines to see where I got my upgrade for a fraction of what's on eBay or RapidRepair. Sorry to repeat or state the obvious on any of this info. )
Background
While SSD (flash memory) is the way to go when using a portable devices, costs are too impractical for large drives (160GB+) and probably will be for another 2 or 3 years as NAND memory production is not becoming cheaper to produce in large capacities at a comparable pace to other tech. So an HDD is probably still the way to go at the moment if you don't feel like breaking the bank and you're looking to replace a 160 GB iPod.
To my knowledge, when you put a new (potentially upgraded) HDD into your iPod, the firmware (the iPod OS) has to support the new hardware.
The iPod classic/video firmware that downloads through iTunes, I believe, only supports Toshiba 1.8" PATA/ZIF drives. And so there's a very particular range of hard drives that can be used.
Furthermore, I believe that only certain iPods have default firmware that can use the full 240GB you'd be looking to upgrade to.
The 5.0 & 5.5 Gen iPod videos, and the 7th Gen 160 GB iPod Classic (the thin model). If you use a 7th gen iPod, you have to buy a new backplate, as the new 240 gb HDD is a bit thicker.
If you look on eBay, everyone that does the 240gb upgrade uses the harddrive:
MK2431GAH
Which are not cheap because they are bought up by iPod upgraders en masse. I tend to see them run for around $180. I believe that if you're using the default iPod firmware that you actually have to use this hard drive, as it's the only 1.8" 240 gb Toshiba ATA drive. (It's also the same HDD they use in the Macbook Air.)
If you have the thick 160 GB iPod classic (6th gen), then you may have to change the firmware to Rockbox, in which case, you may be able to go with a cheaper 240 GB 1.8" HDD. Or find a way to get the 7th gen firmware.
Note, that the size limitations of an iPod may not come down to the firmware, but also to the internal RAM and other specs, as the device simply may not be able to access the entire available filesystem, and may have to create some smaller partition on the device that it can handle.
---------- Where I Got Mine ----------
I had a 7th gen 160 iPod classic (Thin model) and found the MK2431GAH for around $180. If you search around you can maybe find a better deal, especially after the holidays.
On the Apple forums, I found out about an eBay user, arturoroars7, who runs a computer repair store in Colorado that also fixes/upgrades iPods.
All I had to do was ship him the iPod, new hard drive (had it shipped to him directly), and pay for the return shipping and labor costs.
Arturo was extremely professional.
He even sold and installed for me a brand new faceplate, 850 mAh battery, and a 240 gb inscribed backplate that he had on stock. He also matched the lowest prices I could find on eBay for the cheapest Chinese equivalent parts, but instead gave me an Apple
OEM original faceplate and apple-quality backplate!
He filled my order during the middle of the holiday season, and had my iPod upgraded within 2 days of receiving and mailed it right back out.
He worked with me the whole time, even when the original company I ordered my hard drive from (Aztekcomputers) sent him the wrong hard drive. He even took the time to return to it them himself so I could process my refund and order the HDD from a different vendor.
The job was done impeccably, and it looks as though I have a factory-new 240 gb iPod classic. I also couldn't find anyone on eBay with better labor prices.
If you don't have an iPod that can just take the 240 GB hard drive, you'll probably have to use Rockbox, and your hard drive options will also be better. Arturo should be able to suggest your best options and pricing for hard drives. The main limit will be the connection type and form factor, as the HDD has to physically fit into the back casing.
Just message him on eBay and ask him about his pricing and what parts he has available, and you should be able to get the ball rolling.
Again, his member id is arturoroars7
Happy Upgrading!
(Once I get approved, I'll post pics of the job.)