Just finished my upgrade to 320 last week. Yes the formatted size is 298, but the usable is 263. At least this is what I had before I did the Restore, so nothing was on the HDD yet. In the system information screen it showed as 263/298. Doesn't seem like anything went wrong during the upgrade. I've read about a percentage being reserved, but close to 40 GB doesn't seem right. Either way it's more than 4 times what I had with the original 60 GB I had in there.
And as for the screws . . . yes they were a !@#$% to get off. Seriously, they are screwed in there like no tomorrow. I had the proper screwdriver size but stripped 3 of them in the first 2 minutes. I stopped short of completely ruining them and even tried rubber dishwashing gloves to give me some extra grip. After realizing that the screws weren't coming out with a screwdriver . . . I kid you not, I went for the needle nose pliers. I was able to grip the sides of the screws just enough and with a lot of torque, able to loosen them enough to use the screwdriver to get them the rest of the way off.
For the Backup/Restore process . . . it's a pain having to watch it take a hour to back up my data and then another hour to restore. My hard drive was pretty much full, so you might not have to wait as long if you haven't used up all your HDD space yet. I would even go as far as saying it might be worth it to just delete all your content except your games saves and back up that way. A few MB would go a lot faster than 50 GB.
Anyhow, after all that I'm now a proud owner of a PS3 with much, much, much more HDD space.