The HD1 and HD2 doesn't use h.264 but standard mpeg4 as Quenaelin stated. The HD2 had improved lower light levels over the HD1a, but it's still not great, also the HD700 low light is pretty poor infact the cg65 does a better job in my view. Vimeo has a comparison between the hd700 and the hd1 see. http://www.vimeo.com/user407571/videos
Judging from this comparison, HD700 has better low light sensitivity, even though it looks more grainy and HD700 has better stabilizer.
Mic input isn't needed if you are satisfied with internal mic. Modding external mic is maybe possible but it is going to be tricky becouse mics are mounted to LCD screen, you have to know which wires are for internal microphone. You can always use externel audio recorder and mix it later if you want hi-fi quality audio.