Yes, you can dump wii games onto the hdd from the wii drive. I'm not which loaders do it, but I am sure that you can.
To find a hard drive, I suggest you check out this page: USB Devices Compatibility List - WikiTemp
I havent done this yet myself, but when I do, I think I will get a 500GB Buffalo Drivestation, but don't be influenced by my decision. Its completely your preference, but try to avoid ones that use a device manager, like a WD Passport. I understand that these can get in the way and cause compatability problems.
You can rip to a hard drive. The selection that says "Install Game" does just that. Hard Drives are hit and miss though. USB flash drives are usually more compatible, but have less storage.