Answers to some of your questions:
No, you can't upgrade the OS
(and there is no HDD in the device
). Windows Mobile refers to Pocket PCs and Smartphones with Windows CE 4.2 .net or higher, so there is no corresponding version of WM for CE 2.11.
As for programs and skins, see:
http://www.hpcfactor.com/downloads/
You can also still find many H/PC programs on the Windows Mobile Today site.
(Just make sure that you use the SH4 versions of each program, if available - you'll usually see this identified either in the download link or inside the download package itself.
) Be aware that many Windows CE 2.11 programs did not include SH4 versions
(and SH3 versions generally won't work
).