I've put a 250gb 7200rpm drive in an Early 2006 with no problems.
For a new hard drive try Newegg.com http://www.newegg.com/Store/SubCategory.aspx?SubCategory=380&name=Laptop-Hard-Dr ives&Order=PRICE
Or OWC http://eshop.macsales.com/shop/hard-drives/2.5-Notebook/
Here are instructions on replacing the hard drive in a MacBook with a removable battery. http://creativemac.digitalmedianet.com/articles/viewarticle.jsp?id=45088
To transfer your current hard drive I like the free application Carbon Copy Cloner. It makes a bootable copy of everything on your hard drive http://www.bombich.com/index.html You'll need a cheap SATA external hard drive case. Put the new drive in the case then format and partition the new drive and clone your old drive to the new one. Check that it's set up right by booting up from the external drive. Then replace your old hard drive with the new one and put your old one in the external case.
Here's a cheap SATA external hard drive case on Amazon http://www.amazon.com/HDE-SATA-Hard-Drive-Enclosure/dp/B001AAVA08/ref=pd_bxgy_pc _text_b
If you don’t have the tools to open up the MacBook OWC has a set for $5