Quite like this mod - I've built a PS2 Slim with an internal 2.5" IDE HD which boots straight to HDLoader - no cd's needed. Good thing, seeing as it no longer has an optical drive....
The PS2 can talk to IDE drives without any problem, but it was never designed for the slim models to do so, as they had no internal space to store one. USB HD's are possible, but they are slow and useless for running stuff.
Fortunately, some clever chap worked out where all the points on a slim motherboard to rebuild an IDE connector.
To work, the Ps2 needs to be modded, and then the IDE soldering performed (you can use HD Connect to get pre-made ribbon cables to fit the motherboard, or solder direct). I then pulled out all the cdrom mechanics, which leaves just enough space for a 2.5" laptop drive (250GB in my case) to live inside. The connectors still just out the back, but it's a pretty compact solution!
I used a HD connect 'cos I'm lazy - could have made it look nicer and not stick out by soldering with wire by hand.
A word of warning - modding the ps2 slim and soldering the IDE points requires soldering to VERY SMALL CONTACTS. This is WAY more tricky than modding GC's/Xbox/N64/Snes/Wii, I can assure you.
As someone emailed to ask, I've added the HD-Connect installation diagrams (although they are still around on google):