There are probably a few ways a hard drive can be relocated in the case without too much trouble. I don't know quite where your network card fits, though. Nicest fit would be to bolt it to something already in there, such as extending off the back of your floppy cage so it just clears the monitor. There are a few places it could be bolted on through the case, which might be less aesthetically desirable. Such as the back or top of the case. Basically, anywhere which avoids touching circuit boards or the CRT should be fine. I would be cautious about power draw with floppies, hard drive, and expansion cards to be sure the PSU doesn't get overloaded.

7.5 on 4MB of RAM might not be too pleasant. If you use an accelerator which allows for more than 8MB of RAM, I would say to go for it.