I would upgrade to 1TB too if I wasn't already so close to retiring my PS3 and moving on to PS4. I do plan on putting a 1TB drive in the PS4 as soon as I get it though.
That's actually the logic I used to get a 1 TB for my PS3 a few months ago. I figured at some point I would just swap it with the PS4's drive.
Regarding deleting install data, I hate to do it because then that game will essentially become dead to me, as whatever impulse I may ever have to get into would be mitigated by the fact that I'm looking at minimum 20-30 mins. to be up and running. Though if you know that there is no way you would ever play a certain game (especially if you don't own it anymore), then those gigs are just a paper weight on your HDD.
EDIT: though it only clears up a relatively small amount, also be sure to delete blu-ray movie install data, if you use your PS3 for that. Though most installs are very small, some can be in the 50-150 MB range, which add up if you're like me and watch a blu-ray every week from Netflix.