Ahhh ... the T21 ... had a T20, 21 and 23 in the past, great laptops. It will definitely take 120GB ... I'm trying desperately to remember if I had a 160gb in a T2x.
I also think from memory it can actually take 12.5mm drives, but avoid that - the drive is directly below the wrist rest and I broke one by putting too much pressure on. The 9.5mm drives (2 platters like everything upto 320GB) today are well clear so no probs.
I'd have a good read of the update info for the BIOS updates on the Lenovo thinkpad site ... it's quite possible that it will take more that 120GB ... the other possibility is to risk getting a 160 / 250GB as the cost difference is minimal. If it isn't compatible with big LBA then you'll just get 137GB capacity usable on those drives (versus about 111 from a 120) ... it might be worth the extra £10 / $20 to get that 26GB anyway??