Hi hpant,
Yes, Inspiron 1525 supports third party 2.5”inch SATA 160 GB hard drive.
The hard dive in 1525 is customer replaceable unit; refer this link to replace the hard drive for Inspiron 1525: http://bit.ly/Sl1m5z
You can also purchase the hard drive online/local store at a cost effective price.
Please reply for any further help.