I did the upgrade last night, and as everybody here has said, it's simple. You just need a couple of tools, and depending on the amount of stuff saved, a USB Flash Drive or External Hard Drive.
So, I picked up a 320GB Seagate Momentus 7200RPM drive last night for $98. Knowing that I had a lot of saved stuff on my PS3 (game saves, downloads, Rock Band songs) I prepped my USB hard drive. The PS3 will only read FAT or FAT32, so I put a 32GB FAT32 partition on the drive and plugged it in to the PS3.
In the System Menu, I selected Backup System and directed the backup to the USB drive (PS3 asks if you would like to back up your system to an external device). After about 45 minutes, the backup was complete, and I was able to shut everything down and replace the drive.
After unplugging ALL of the cables, I opened the Hard Drive cover on the bottom of the PS3 with a flathead screwdriver, and saw the HD drawer screwed in with a single blue phillips head screw. Undid the screw, and then pulled the latch to free the drive from the unit.
I then undid the 4 phillips head screws to detach the drive from the mount, put the new drive on, and then put the screws back. I then reattached the drive to the PS3, put back the blue screw, replaced the cover, and that's it!
When the PS3 booted up, it told me that the drive had not been formatted, and asked if I would like to format now. After the format, it rebooted, and everything was up and running.
However, my goal in putting a 320GB drive into my PS3 was to install Linux, so I actually formatted the drive again, allotting 10GB for an 'Other OS'. Again, quick reformat, reboot, and I was back. I then re-attached my external USB drive, and using the same method, restored my data back to my new drive, again taking about 45 minutes. After one last reboot, my system looked like it hadn't been touched! All my games were there, even my theme was re-applied!
I then went along with the Linux install, and while I DO have Linux in and running, I'm having some problems with it recognizing the wireless, and getting 1080p resolution, but those are challenges for tonight.