If your G4 only has one HD right now, you can easily add a second one to it. On the cable, where the original disk is connected, is a second connector for a second disk. You just have to make sure following things:
1. On both drives, the jumper should be set to CS (Cable Select)
2. The one that is getting OS X needs to be on the connector at the end of the cable, thus being recognized as master. Otherwise you won't be able to install OS X.
But before upgrading to OS X, you should check if your Mac needs a firmware upgrade. Some older Macs need that before running OS X.
Check here:
http://docs.info.apple.com/article.html?artnum=86117
And no, a 250GB drive will not be entirely recognised, the limit for this old Mac being at 120GB. Unless you puy a PCI IDE controller cart, which also would make disc accesses faster.