You can add a hard drive to it but instead I would first recommend you try to find a RAM-Drive or RAM link. Using a battery-backed RAM expander is much faster than a hard drive and you don't have to worry about finding an old SCSI drive that will work with the CMD HD-40 series hard drive bays if the old one breaks. (BTW If you DO decide to get a CMD hard drive AND RAM link then be sure to try to find the parallel connector to go between the hard drive and the Ram Link. It will speed up hard drive access a LOT.)
If you can find one, a CMD FD series floppy drive will let you use High density 3.5" floppy disks with your C128. Given the low memory consumption of most Commodore software it will seem like a zip drive on a PC.
As for software I used GEOS 128 with my 128 for years. It's a good piece of software and makes adequate use of whatever hardware you use with it. I've heard Contiki is better but haven't used it so I can't verify that.
