4 TB (TB stands for "TeraByte", your Miggy will be dead long before hard drives of that size are available).
Max. filesize is still 2 GB though.
If you want to use the machine for more than "just" gaming, I'd highly recommend OS 3.9.
Stay clear of OS3.5, you may get it quite cheap, but it sucks compared to 3.9 (the latter one is *much* more stable and has *lots* of additional/improved features).
But none of the DevCDs requires OS3.9. They *support* it of course, but they don't require it.
The latest NDK is available from Amiga Inc.'s homepage.