well for madworld, grab a NTSC version, im guessing you downloaded a PAL copy. i have madworld running fine on my 3.2u system with cioscorp 1.01 installed as to play via disc channel.
and for purchasing ext hard drives, i just checked best buy (USA) site and i can see numerous drives in the sub 100 dollar range..
Iomega - Prestige 500GB External USB 2.0 Hard Drive --> 80$$USD
Seagate - FreeAgent Desk 500GB External USB 2.0 Hard Drive - Silver --> 85$$USD
and you can go even cheaper if you buy yourself an enclosure and sata drive separate..
im sure you can find drives even cheaper, just look around, check tigerdirect, ncix, fry's etc etc