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The optical drive is bad. My plan is to purchase the correct replacement for the Pioneer and update my HardDrive to 2TB(current 320GB). I have a current backup on an external Time Machine drive. Using the instructions here for both drives: Do I do all the replacements at the same time (one tear down and one re-assemble) then boot to my OSX install disc (Snow Leopard) hope my install of the optical was good and use disc utility to partition, format and then restore from Time Machine; OR should I R&R the optical drive first, make sure it works ok, then do the HardDrive update? Thanks…..

I would just install both at the same time while you are inside the machine. As long as the Optical and Hard Drive are compatible, you should be fine. Make sure all connectors are properly seated before reassembly. Good luck.