Currently they only sell 1TB drives that have been blessed by Apple and come with the sled so they are hot swappable into the xserve. The sled is necessary. Apple says that the 1TB is max. It isn't because you are right, they are scalable.

What this means is my Xserve has a 3TB top end and my tower does not. I need more than that. What I should have done is use a tower as my ftp server. Hard to go back now. Or at least a tad inconvenient.