A 2hr movie takes up about 7.5GB of space on DVD, so yeah you could fit nearly 10 hours of compressed finished product on there, but that is the rub - finished product takes up a hell of a lot less space than work in progress.
The need for a heap of disc space is for a couple of reasons.
1) Even at standard DVD quality, the finished version of your movie will take up around 7GB of space.
When editing, you will need to have a hell of a lot more space available to you. You need your source footage stored at all time to be able to edit it - so lock out around 7-10GB for that. You need the same amount of space again to put out any edited version that you create, so even compressed there is now around 20GB gone. You also need room to save all your project files, work in progress and 'tests' where you might put out 5 or six different version s of a scene to see what works and what doesn't.
You need double that space again to be able to multipass encode it back to DVD, (around 15-20GB) so your 40GB hard disc is now full, and that is if you a) Work in a heavily compressed format, losing quality every time you touch it - b) Can somehow amazingly get the job done first go c) Save only one version of your project.
2) Most editing systems won't even allow you to edit MPEG2 video directly - this means that you have to uncompress it in some way to edit it - so it takes up a lot more space. If you compress it into something else to edit it, then the editing process is *painful*as your editing software gets very slow decompressing and recompressing every time you make a change - that is why those new MP4video cameras suck - just adding a fade is instant when using uncompressed video, but MP4 compressed video it takes up to 5-10minutes just to add a crossfade! Some systems do allow you to edit MPEG2 directly, but it isn't a lot of fun to work that way.
Basically to edit an entire movie, you will want about 5 times the space the film takes up, this is because you end up rendering out lots of different versions and having lots of saved projects, as you will often try something that doesn't quite work, or part of it works etc. and you keep comparing versions, keeping bits of one or another as you go, maybe going down a path for a week before reverting back to what you did originally etc. You will be astounded how much space you eat up in a short period of time.
I have just over a TB taken up with X0 files so far and am constantly having to remove stuff to get space to continue working.
The only analogy I can think of is that a finished novel might be 800 pages, but how many pages (digital or otherwise) do you think they went through to get to that end result?
Besides all of that, you can get at least a 160GB drive for thsame money, so why buy a 40GB one?