The hard drive can be done but it has to be the right size to fit. I has to be a 2.5" drive and can NOT be any taller (thicker) then 9.5mm which will limit you to around 80gig at the high end for capacity. try and get a faster spinning drive, 7200 if possible, you will take a hit on battery life and it will run a touch hotter then a slower drive but the performance change is all to the good, much faster.
You can add a cdrw, I have seen them for sale at a couple of places like this one:
http://www.wegenermedia.com/ibookcdrwhome.htm
Larry