All possible upgrades on iMac 8,1 ?

Apple won't work on your iMac. They don't do that kind of upgrade and I suspect your computer is so old they wouln't do it even if they did (if that makes sense).

Changing hard drive in an iMac is not an easy task. You have to remove the display glass.

You can upgrade your RAM which since you have 2 GB would help a lot. I think it can only take up to 6 GB. I would question if it is worth sinking any money into a Mac that old. I have an '08 iMac and I just put up with 4 GB since I do not want to spend any money on this one.

Without checking I think you are right that it tops out at El Capitan, but you'd want more RAM to use it.

Upgrade to OS X El Capitan - https://support.apple.com/HT206886 - "OS X El Capitan remains available for Mac computers that can't upgrade to macOS High Sierra, or that need to upgrade to El Capitan first." Includes direct link to El Capitan installer app.