I can officially confirm that the 320GB Western Digital WD3200BEVE drive works (BTW, this drive is now available for <$90). This is using PhatNoise Music Manager 2.35 - I did not try other versions. Full capacity of the drive is available in the software.
I did have some issues at first. When I first installed the drive in the DMS, I attempted to set it up using the PhatHack DMS tools 2.12. Everything appeared to work correctly, but when I stated to copy new files over to the new drive, I got several CRC errors. So, I ended up installing the old DMS drive in an external enclosure, and cloning it to the new DMS drive, adjusting the size of the PHTDTA partition to take advantage of the new space (I used Acronis True Image). This worked great - it allowed me to seamlessly migrate to the new drive with my library intact, and both the PhatBox and Music Manager software had no issues. I've also been able to add many new files since doing this, and have not had a single CRC error.
If you are considering cloning a drive to a new 320GB, let me also add that my old drive was 160GB, so LBA48 was already installed. If you are moving from a smaller drive to a >127GB one via cloning, be sure to add LBA48.
-db