Carol,
I have used my T5 since January, and one of the first things I did was put MP3s on it. I bought MMplayer, so I could watch movies, but it does a better job than real player for audio too. Just the other day, I installed Pocket tunes, and it looks like I have another app to go buy. Pocket tunes has a much cleaner interface, and handles many more audio formats than MMplayer or real player does.
Now for your questions. I have a 512 SD card that I normally use to keep my MP3s on, as I can copy them to the card in a reader much faster than I can copy tham to the palm, even in drive mode. If I feel the need for more than 512, I can always put some in the internal memory too.
Perhaps my biggest piece of advice would be to use the biggest SD card you can to hold them, as it is much easier than copying to the palm directly.
As for output, I use the built in speaker, and have had my office mates ask me to turn it down. So I think youll have good luck using your palm for MP3s.
