Thank you again, Flash. You've been most helpful. I really do appreciate your willingness to share your knowledge and experience with someone like me who is obviously a noob.
I'm going to give my boss 4 options -
1) Upgrade to PERC 6/i and 2TB drives
2) Upgrade to H700 and 3TB drives
3) Add MD1200
4) Replace server with NX3200
I'm pushing for option 4. It's actually less expensive than #3, will probably perform better and leaves room for expansion.