Tony,
I have a 40 gig external USB HD running on my PSR 3K. The harddrive is a 2.5 inch notebook by Samsung. (They were on sale for 69 bucks at CompUSA recently) I also used a case from BananaPC.com ($15). The drive needs to be partitioned before the 3K recognizes it, but a 40 gig partition is not a problem and the file allocation table can be FAT32. Don't use NTFS tho.
The keyboard supplies enough power to run the drive. The next challenge is an organized way to use all that capacity. I'm still trying to fill up my 128meg thumb drive!
Good luck,
Ron