It's not an aux drive. You will open the case, take out the old drive and replace it with the new one which has been formatted with the software you bought from PVRupgrade.
You can avoid the $20 charge if you know someone with a similar Tivo. I imagine you have a Tivo with a model starting with 540. If you know someone with a Tivo whose model number starts with the same 3 digits, you can copy the software off their hard drive. If you have handled hard drive installations before, you are not going to screw anything up, but whoever you borrow this from may get a little queezy when you tell them that you will be dismantling their tivo.
If you want to go that route, you will be doing exactly the process as if you were upgrading a working Tivo to a new, larger drive. It is irrelevant that the "old drive" was from a different machine. Take a look at the Upgrade forum.
The weaknees guide is especially good, and there is a long faq thread on it. Be attentive to the remark on being careful about the white cable that goes from the board to the faceplate. Make sure if you accidentally brush up against it that it is going into both connectors squarely.
The part about disconnecting your PC's drives to Format the Tivo drive can be avoided by simply buying a preformatted drive from Weaknees or PVRupgrade. That way all you have to do is open the tivo, swap the drive, and you are done. That's pretty simple, but you pay a lot extra for the convenience. I have seen some guys on eBay listing preformatted Tivo drives. Most of them are probably legit, and have a much better price. The Weaknees and PVRupgrade folks are nice folks and they warrant their work.
While you are at all of this, you could upgrade your machine to a two drive unit. I gave my sister a 600GB Tivo for christmas- with two 300GB drives. You may not need that much space, but if you snag some cheap drives you can put any combination you want in there. You need an adapter rack- I bought the nice one that Weaknees sells- has an extra fan on it plus a power gizmo to make sure the drives spin up right or don't suck too much power at the same time. Dandy little thing.
So- a variety of ways to go about the fix. Pick whichever suits your comfort level, but one thing everyone says- It looks a lot more scary on paper than it really is. It is really a very trivial process. Just read the instructions, triple check your command line instruction, don't mess up that white connector cable and you will be fine.