Upgrading disk capacity in ReadyNAS 212

First of all, we always do recommend backups of the NAS.  RAID simply isn't enough to keep data safe.  In your case you have a failing disk already, so your array is more vulnerable than usual.  If your data matters to you, you need to keep at least one other copy of it on a different device.  Personally I keep two other copies.

That said, the procedure is to replace the failing drive first.  You can hot-insert the new disk (remove the old one and insert the new one with the NAS running).  If the disk is blank (recommended) and you are using the default XRAID, then the NAS will automatically put it into the array and resync.

When that's complete, replace the other (hopefully healthy disk) the same way.

When you buy new disks, get either NAS-purposed drives (WDC Red or Seagate IronWolf), or enterprise-class drives (for instance WDC Red Pro).  3 and 4 TB are close in price per TB, you might consider going to 4 TB instead of 3.  Generally I test the drives with vendor tools in a Windows PC first (seatools for Seagate, lifeguard for Western Digital).  Those tools don't care if the drive is formatted or not (and if they are formatted I use the "write zeros" test in the tools to blank them).

Don't get desktop-class drives for the NAS.  The Seagate DM series (particularly the ST3000DMxxx) is one in particular to avoid - it has a high failure rate in RAID arrays.