As we understand, The Firmware limits the use of other than WD drives, Let alone using 3.5" external HDD, You are welcome to try it, Most likely will fail as the FW will fail to spin the drive.
The only series that is known to work on the WD TV LIVE HUB is the WD 2.5" scorpio Blue series
Having said, You may want to experiment with WD drives, you may have better luck
Let us know
Just replaced my live hub internal drive with a seagate drive. I know this is an old post so not sure if WD upgraded firmware for othher drives since then. however those who are looking to downgrade there drive rather than upgrade i know for sure that the Seagate Momentus 5400.2 60gb drive works internally ST96812AS.
I took this out my ps3 a few years ago. I previously had a live hub when it first came out but sold it due to the SMP coming out and WD seeming to support the smp more than the hub with faster updates, BBC iplayer and more servises. I never had any problems with streaming 3d BD isos (even though played only in 2D) to the Hub without ever stuttering. When i purchased a SMP i noticed it was not capable of streaming full isos due to the 100 lan port so sold it and went back to the live hub. I have no need for a 1 tb internal drive as it is slow as **bleep** to transfer to so i used to open it up remove the drive and connect by sata to transfer stuff. As i now have a 8tb qnap nas the only reason i purchased a live hub again was because of the gigabit lan. I'll use the 1 tb for my ps3 JB and used the 60gb from my ps3 for the hub.
Formatting the seagate 60gb was straight forward as plugging it in and following format instructions. Once formatted i removed the 60gb connected to my pc to check if partitions were created and both partition were created. WDTVPriv partition was created at its normal size same like the 1tb partition size and the remoaining was allocated to the second partion WDTVLiveHub.
60gb is more than enough space for me as all i wanted was an internal HDD for whatever the live hub needed it for not for movies, music or pictures. If i had a smaller drive i would have used it instead. So for all those who want to replace or downgrade theire drive try a seagate Momentus. 60gb version works for sure not sure about bigger or smaller sizes.