Thank you for your advise.I think there wont be any problem with my system if i replace with 500GB instead of 250GB.Also i need your advise wether i can go for 7200RPM instead of 5400RPM
Capacity and rpm dont matter, they will all work. If you want to speed up your laptop considerably without much extra cost look at getting a SSHD drive.
From what i've found out, Dell Insprion 1526 has AMD chipset though 1525 has the Intel chipset and probably the one you're talking about. It won't be a problem with the storage, it supports upto 2GB of storage.