<< Interesting. Is this a super compact PC, or a WinCE type device? >>
WinCE variant.
<< If it runs Windows, can the SDRAM be upgraded? >>
Only if you're willing to break out the soldering iron, and then only if you can find the right chips.
(One has been upgraded to 64MB, but any higher and there might be a bios limitation, or the guy might have just had the wrong chips for the job.)
<< Can a Microdrive or something similar be added to it? >>
As is? A CF card will work, I don't think a Microdrive has been tested yet, and a laptop hdd will function with a CD-IDE 44pin adapter.
<< Now can anyone answer the mandatory service question? >>
Yes, the service is mandatory if you want to run the device "as is", without hacking it into something more useful.
There "is" a linux image for it though, and CF cards/IDE devices can be used for a 9x OS, to get around that limitation.