your wii will only read original nintendo disc, you will only be able to play backups using USB Loader and will not be able to play any dvd-video. however you can still do everything else.
I read somewhere that SD card up to max 2 GB can be used... What is the max size of SD Card that I can use here?
the wii system menu version 4.0 and above support sd cards of upto 32 GB. however there are many homebrew apps which work best with 2 GB or lower cards.
Here I read USB harddrive that can be used. Would USB stick also do? USB stick would be faster (and I already have one) and easier to carry with you (though smalle capacity).
for the initial hacking and setup of your wii, using a 2 GB or less card is recommended. once you are comfortably running then you can start using SDHC and USB devices. many apps now support USB and SD alike. i run everything from a fat32 partition on my WBFS hard drive. except MPlayer CE, which works best from sd cards.
system menu 4.0 official supports SDHC cards however many homebrew apps can still read the SDHC cards even if using lower firmware.
i use and have setup many 1 TB Western Digital My Book drives, these drives have external power supply. though i have also setup 1 seagate freeagent 500 GB drive which uses USB power. just be sure to disable any type of sleep or power save modes.
doest matter to me, there is not much activity in this thread anyway.