Flash all the way is the only thing that makes sense. You can _replace_ flash, _upgrade_ flash, and it's inherently infinitely safer (try shaking your precious hard disk device, don't forget to pray).
With the HD stopping and starting all the time you get latency when opening files and starting applications (when the apps. are on the HD). This has been tried before, e.g. Palm Lifedrive (now discontinued, as a lot of people said would happen because it used a HD).