Keep in mind that even after you have updated to SP2 your harddrive still wont show up as 250GB. I will most likely be somewhere around 238GB and this isn't the fault of Windows, but because of the fact that harddrive manufacturers use MB, but everyone else uses MiB. What Windows calls MB is actually MiB.
1,000,000 bytes = 1Megabyte
1,048,576 bytes = 1Mebibyte
If you have already formatted the drive with one 125GB partition you will after the update either need to remove that and create a new partition that spans the entire drive or create a new partition that uses the left over space that the other partition doesn't.