First, before replacing the drive, take out the laptop's battery.
With Gigabyte its usually 5-6 screws to get the back compartment to release and you take off one piece of plastic. That gives you access to the hard drive, memory and wireless cards. The hard drive is usually secured with a single screw - take it out, slide the drive sideways and remove. Once you replace the old drive with a new one in the caddy, just follow the steps in reverse.
You'll need a 2.5" SATA hard drive. 320GB versions start from about R500 depending on where you shop.
Its rubbish. You can use your license on the back to re-install your OS, you just need the install disc. There are two ways of doing this:
1) Obtain a Windows 7 install disc from a friend - can be any version, so long as it's for Windows 7 32-bit, as there are no 64-bit editions of Starter
2) Download a 32-bit version of the disc, which you can do here:
Windows 7 Pro 32-bit (download preferable)
3) Then
follow this guide to create a multi-version, USB-bootable installer for Windows 7, which also opens up the option for Starter. Using a disc will require you to create an ISO of it and then follow the steps in the guide which deals with the ISO.
4) Activate the license by following the prompts to activate it over the phone and give Microsoft a call: 0801 43 43 43 (open 24/7)
Alternatively, buy Windows 8 or use Ubuntu Linux/Linux Mint. Windows 7 Starter is a horrible OS, IMO.