The camera will take a XD card up to 512Mb and a CF card up to 1Gb. You can have one of each in the camera and swich between them.
Apart from the supplied Xd card, I have only used a CF card because of the price advantage.
Higher capacity batteries will not harm the camera.
The supplied charger may take longer to charge higher capacity batteries or be unsuitable.....you'll have to read the charger instructions.