I can't say for sure, it's been a while since i've looked at all this stuff, but i'm pretty positive that yes, you can "dial" over broadband after enabling the USB ports.

As for space. I've got 160GB (which is limited to 120 until I install a hacked kernel) and i haven't hit the wall yet. I'm starting to save tons of movies though, so i can see it coming soon. Keep in mind that speed becomes an issue. My DTivo is PAINFULLY slow at times. The now playing list locks up quite often for 20 seconds or more.