It really depends on what you use the Laptop for, I think T23 is a great laptop and pretty reliable, I owned a T21, T41 and my current one is T43.
T23 do very well with Linux installed as all hardware is fully supported in case you want to go that route, otherwise the installed OS should prove to be OK.
You basically have two choices:
1. Replace the one with a larger capacity drive as you already indicated
2. Get an external drive and use it in combination, that way you can have important data in two places.
I would actually go for the second option as my current configuration is based in similar fashion. I have an 80 GB internal drive and I use a Lacie Mobile drive for backup.
If you need any guidance on Linux I will provide you with specific links to installing a distro on T23, if you so desire.