I have a Dell Dimension 8400 with 3GB of RAM and a 3.2 Ghz Intel Pentium 4 HT processor, it currently has a 145GB HD and I want to REALLY upgrade it to use it as a media center PC. I want to put a 1 to 1.5 TB HD in it. Now I have read that it is limited to 320GB, 500GB, and that it has no limit. I just wanted to clear up the confusion. So is it limited? If so why?

I'd wager no limit (other than imposed by 48 bit addressing), given that the current drive is larger than the 137 GB barrier imposed by 28 bit ATA sector addressing. However, it's Dell. Contact Dell support and ask.

Yeah it doesn't matter but it also depends on the type of drive because of the sata/ide types I know sata there is a 1.5 tb hdd
Because of the newer age of the computer and specs it'll support a larger drive