Never take a tech's word for anything.
There are two "partitiions," the "user" partition, and the "VOD" partition. The User partition is filled by things that you pick, while the VOD partition is allocated so that when you order a VOD event, it plays off of the disk instead of trying to pick a stream off of the satellite. Those of us with no broadband or phone line get the VOD space constantly filled when the tuners aren't doing anything else. You cannot change how this space is allocated, however, which sucks.
Towards the end of my 625, Dish pushed an update that did reduce the VOD allocation in favor of the user allocation. We can only hope that they do the same thing with the VIP DVRs some day.
To answer your other question, no, speed doesn't matter as long as it's USB 2.0 compliant, less than 1.5TB in size, and uses it's own power supply. Seagate, IOmega, and others make really sexy little 2.5" external drives that get their power from the "host" machine's USB port. The Dish VIP receivers don't provide enough power through the USB port for this to work, so you have to use a wall wart style transformer to power the disk.