if ~120 GB will be enough for your OS installation and a few programs, you could consider picking up a solid state drive. It really makes everything snappy.
if you were getting another hard drive, I'd probably go with the 1TB (1,000 GB). with everything else being equal, (both are 7200 RPM drives, and same generation) the 1TB should be a little faster than a 500 GB drive, because it has higher platter density.
in regards to C: and H: partitions,
hard drives are faster on the outer rim of the platter. see how the speed drops gradually?
by limiting use to just x% of the capacity. you will be using only the fastest part of the hard drive
this example below shows the same hard drive, when short stroked to just 10%
there is no definite rule how many percent of the hard drive you want to short stroke. i believe 20-25% are fairly common.
if you want pure performance, raid 0 is the best.