There are people selling 1TB modded ATV1's on ebay. They are using PATA to SATA adapters to fit a HDD in the ATV.
I paid more than 100GBP for a 160Gb ATV1 brand new so if someone is offering a genuine internally modded ATV working +/- the software hacks, I think it is a good deal.
There are plenty of threads about the pros and cons of ATV1 v ATV2 but if internal storage matters to you, then go for it!
PS: if you are buying on ebay, there are many people offering the upgrade SERVICE for 100GBP but you have to supply the ATV.