Another easy way to put it, comparing to pc things, Chip Ram is like the memory on the gfx card, Fast Ram is like the Ram you add on the motherboard. It's ofcourse a lot complicated than that but it the easiest way to explain ...
Adding a harddrive to your A500 is no problem, keeping a few things in mind. Most harddrive-cases are attached on the left side of the A500 and demand a scsi harddrive and not ide. That's one thing. Also to make full use of it you better have kickstart 2.0 because I think that you are too limited when using lower kickstarts ...