Yes, you may go for a 2 TB drives because 4 TB drives are not supported on the S100 controller.   There will be appreciable reduction in read and write performance in RAID 1 due to overhead caused by parity checks and controls for redundancy purposes.   I can not for sure provide the quantitative figure by which the performance will be degraded. While you will have good performance with RAID 0, you risk losing your data when you have a failure of a single disk because there is no redundancy of data as provided by RAID 1. Over all, the performance of software based RAID controllers such as S100 is limited by design. For better performance, I would recommend upgrading to hardware based RAID controllers like the H200. I hope this answers you question.
Hello, I have a T110 II with 2x500GB in RAID 1 (S100), so 1TB in total,  and I'm running out of disk space. I'm perfectly happy with the machine performance but I would need 4TB, in RAID 0 (mirroring). The machine is running Windows SBS essentials 2011. I'm a bit reluctant to buy a new server and throw away an old one just because of disk space. Any suggestions regarding RAID controller, hard drives and upgrade procedure? Thanks. 
Upgrade T110 II Hard Drive space