Hey there!
A 2.5' Hard Drive over 2Gig will actually work quite happily in an A1200 but only if it is seperated into partitions of no greater than 2Gig each.
I would advise a tower conversion as this gives you a boosted power supply and negates the need for external CD rom drives and stuff which can be a little expensive. Eyetech do a decent tower kit for a little under 200 pounds.
If this is a too expensive then i would advise using an old A500 PSU with your A1200 as the standard A1200 PSU is a bit crappy and may not supply enough power to your Amiga to power your HD and CD rom. There are two types of A500 PSU's one is quite light and one is about the weight of a house brick, it is this one you want.
An 030 is a fairly good Accellerator to use these can be found relatively cheaply, but an 040 or an 060 are better but can be difficult to find and expensive. Be warned though, these boards may not work with newer RAM SIMMS (such as DDR, Eyetech supply Amiga Accellerator board compatible RAM for a price) and some only allow you to fit around 16 or 32mb of RAM.
If you buy an external CDROM drive, try to choose an IDE one rather than an SCSI one. An SCSI one requires a piece of equipment called a Squirrell which plugs into the side of your A1200. The Squirrell has problems with certain types of Accellerator boards when fitted with over 4mb of RAM and won't work. An IDE one would be a better option (and cheaper) again Eyetech is really the place to go.
One last thing 3.1 ROM chips are definately a good idea, these can be found for around 30 pounds.
Hope i could be of some help :-D
