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Can I upgrade my Netbook to a larger & faster HDD??

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7200 RPM generates more heat and draws more power. 7200 rpm drives tend not to last as long, either. It will work, it will just hurt the battery life a bit and run a bit hotter. Faster RPM drives are a bit less tolerant of rough handling.

Most netbooks do not have fans, and the biggest casualty of too much heat is typically the hard drive. If you are sensible with the unit regarding keeping it cool, and don't treat it like a toddler, you will be fine.

You cannot run Windows from an external drive.

Also, external drive cases should be used only for short-term use, and not as an everyday drive. Most have no cooling fan so the drive runs wayyyy too hot, so the drive will live a short miserable life in an enclosure.