I dont know the answer for the HHD capasity issues, but just a comment related to the topic title.
I just have got a Mac Mini myself, and after some forum reading I discovered that apearently the Mac Mini G4 is not able to boot from USB. If you want to be able to boot from your MorphOS external HDD, you probably must find a way to connect it by firewire. At least that is what they state in the mac forums, that the mini ppc only can boot from firewire.