Basically, inside the iPod Mini is a microdrive- essentially, it's a harddrive. Lots of people have found that the microdrive is in fact swappable with a compact flash card. Once you get it open, you'll see the harddrive on a small cable. The microdrive should be surrounded by blue rubber bumpers and black adhesive.
I'd look into ordering a compact flash card off eBay. It makes for a faster Mini (less delay in queueing songs), and it is less susceptible to shock damage.