Don't bother with a hard drive, get a 4/8/16Gb CF card, and a CF -> IDE adapter instead. Uses less power, is silent, and is solid state - oh yeah they're also cheap. Be careful though, as not all brands of Compact Flash card seem to play ball with the Amiga. I use both Sandisk and Kingston which work for me. I think Amigakit sell them, if not search e-bay and you'll find loads.
Some more modern 2.5" IDE HDDs don't seem to work with the Amiga anyway from what I've read, but I haven't tried so couldn't say for sure.
Also, get a PCMCIA CF adapter and CF card, again from Amikit, comes with drivers etc. Then you'll never need worry about your external floppy drive. As for the internal one, if you haven't already, try cleaning it with an air duster/head cleaner disk etc, its probably just caked in dust.
If the expansion card doesn't work, check the A1200 edge connector for corrosion/dirt etc. Your RAM expansion is probably this:
http://amiga.resource.cx/photos/pc1204