Much like V1, Vail will choose the "first" disk it sees, usually IDE 0 Master, or SATA 1. So make sure you connect your preferred system disk properly.
As for advanced format drives, elsewhere Mark Vayman has mentioned that they are supported. However, if you read the known installation issues announcement at the top of this forum, you'll see known issue that prevents using one as the system disk, and you
may have to jumper any advanced format disks used elsewhere in the storage pool; I would try without and see, however.
As for the size of the system disk, the disk in my Vail server is 160 GB. That seems just fine to me. :)
You can create a bootable flash drive for installation if you want; just prepare the flash drive properly and extract the .iso as you normally would. Whether the installation will succeed or not depends on your hardware. Much as I'd like to, my Vail server
won't successfully boot from a Vail install flash no matter what I do.
You should read all the documentation and announcements fully prior to installing; there's a great deal of information that you should absorb, and many questions that will be answered.
I'm not on the WHS team, I just post a lot. :)