Yes, you can do this. I just installed a Seagate ST1000DM003 (1TB, Sata
III) in my XPS420 to replace my 2nd drive, a Western Digital 500GB,
that's been failing chkdsk for some time. No problems.
You'll probably have to use a right-angle cable (like the one on your
existing drive installation) to clear the side cover.
Frank