I did this modification to my 1040 STe using a TEAC FD235-HF4 1.44 meg
drive and it works very well. I did not replace my floppy controller chip.
Another text that I read about this mod said that some of the WD 1772 chips
are capable of working at 16 mhz, those with 02-02 as part of the number on
the chip. Mine seems to be working fine and I have formatted HD disks out
1.66 megs with no problems. Whether or not my WD chip will last very long
remains to be seen. I keep a standard floppy in the drive so that the
signal to the controller chip is 8 mhz. When I insert a HD floppy, the
16mhz signal is sent to the WD chip.
   For the STe, I got the 16 mhz signal from pin 2 of the large surface
mount chip near the power supply. It is also available at pin 52 of the
DMA/shifter chip(U401).
   The only problem that I have had so far is that drive B(external) does
not work with this modification( on my machine). If I do the density
switching with a toggle switch, drive B works fine. I don't use B often, so
I'm not worried about it.
   I enabled HIGH DENSITY formatting from the desktop of my machine(TOS
2.06) by closing jumper E6 near the ROM's on the motherboard, but I usually
use the DFormat utility that came with Diamond Back.
   I assume no responsibility for your computer if you do this
modification. Your warranty will probably not be worth anything if you try
this. If you don't feel comfortable soldering and unsoldering to tiny
parts, don't try this. I did have to cut out the case of the computer in
order for the faceplate of the new drive to be clear.
   The following is the original text file that I used as a guide to do
this modification. It was written by Wes Newell and is available on his
BBS. the WYLIE CONNECTION. 
           
                                 PAUL
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Adding a 1.44 meg floppy to ORIGINAL ST's (NOT E's)

Things you will need:
1 HD disk drive. Preferably that supports output of density select.
1 Floppy controller chip capable of running 16 mhz (AJAX chip).
A TOS that will support HD drives. I use 2.06 with TAB board.
A format utility.     
     First let me explain the differences between the Atari (Epson SMD-340)
and some other drives. The Epson SMD-340 that Atari is currently selling
with the upgrade kit for the MEGA STE, DOES NOT have the capability to
provide an output of density on pin 2. This means that if you use this drive
you will have to use a switch to switch densities. As it comes from Atari,
it is jumpered as follows:

Pin 14-15 = Drive Select 0 (drive A)
Pin 5-13  = The mode (density) is switched by the HDI input (pin 2)
Pin 1-2   = The 2 meg mode (1.44) is set by the HDI input HIGH

Other jumper settings: 15-16=DS1, 6-7=DS2, 7-8=DS3, 2-3=2 meg mode set by
HDI input LOW, and 4-5=The mode is switched by the internal sensor.
     As you may have figured out by now there are a couple of ways to hook
up this drive. On mine, I removed the 5-13 jumper and installed 4-5. This
lets the drive switch modes to 1.44 when a disk with the 1.44 meg extra hole
is inserted. The reason I did it this way is so I can easily tell my 1.44
disk from my 720K disk. If you want to use disk without the extra hole for
both densities, then leave 5-13 jumpered and configure jumper pins 1-2 or
2-3 depending on how you want to control the density, with a high (+5) or
low (ground). You must then manually switch the density.
     Now you must also be able to switch the 8 mhz clock going to pin 18 of
the floppy controller chip to 16 mhz for HD (1.44) operation. I simply bent
the pin out and connected it to the center post of a spdt toggle switch and
connected the 8 mhz clock (from the empty pin 18 socket) to one side, and
connected the other side to 16 mhz (pin 39 of video shifter chip). You could
also have a switch to control an IC that would allow you to control both
clock rate and density select with one switch, or use a dpdt switch.

Drives that CAN output density select on pin 2.

     Using a drive that can OUTPUT density select on pin 2 will allow you to 
make the operation of the drive automatic (without a manual switch). Set the 
jumpers to output density on pin 2. Use this drive output to control an IC 
that flip-flops the clock to pin 18 of the floppy controller. You MUST use 
the proper disk, as they are what selects the density.
     I used a 74F157 chip to control the clock going to the Ajax chip. It 
was the easiest way I could find with the the TTL chips I had at my 
disposal. The connections are minimal and simple; pins 8 and 15 to ground,
pin 16 to +5v, pin 1 (strobe) to pin 2 of the drive, pin 14 to 16mhz (pin
39 of shifter), pin 13 to 8mhz, and pin 12 to pin 18 of the Ajax (floppy
cont.)       
     In the above circuit, the 157 chip will send the 16 mhz clock to the 
floppy controller when a HD disk is inserted in drive A, and the drive 
select for that drive goes low (selected). In all other cases, 8 mhz is sent 
to the controller. This will allow the use of both drive types on the
system.
     There are many different ways to hook up drives. Make sure that you 
get the jumper settings with the drive that you get. Life can be tough 
without them.
              Wes Newell, fidonet 1:124/7028, Atarinet 51:202/0