if you do go with an external drive, remember that an external drive is nothing more than an internal drive in a firewire or usb (or other interface) case. vendors will charge a lot more for an "external drive'" than you'd pay if you just bought a standard 3.5 inch drive and put it in a usb2 case
so i'd say just grab a couple hundred gig drive for a good price, and drop it in a firewire or usb2 case (for like 50 bucks)