The space for a 2.5" HD is to the top left with a 2.5" cable connector.
There isn't much space for a 3.5" drive, a towered A1200 would be better. You will need to add a power splitter from the floppy power to power the 3.5" drive as no power header is available for 3.5" is provided.
If you have WB 3.0 or 3.1, do not use any more than 4GB unless you use SFS or PFS to enable disk space beyond the 32bit limit otherwise you need Workbench 3.5 or 3.9.