I always wondered if a larger PIC would be capable of doing all the necessary magic to decode and store data; I believe the larger PICs have 512Kb RAM. I was considering something like this as a memory expansion on an 8 bit machine - I guess the difficult bit would be the timing, which may be even more of an issue on the Amiga.
Good luck on the 501 replacement though - stuff like this is a great learning exercise. If others benefit from your work it's a bonus
