I have a second internal HDD (IDE) which serves as a backup. I also have two external HDD's (LaCie, USB2, one for images, and one for ) that are fast enough to burn from on my external DVD burner.
Thiis external setup allows me to place the  puter itself out of view but so that it does have the needed good cooling.
I also open it every three months (approximately) to remove all accumulated dust.

I would never buy a very large external hdd for reasons of failure. Three of 360GB are better that one of 1tera  ( speaking the newest (sigh) speak about sizes of HDD's ). When one fails, you still have the others in the former setup.

Like Tom, I only connect the one I need when the need to backup is there.

I also back up on dvd-r 's. I read Memorex are the most reliable.

I guess I trust this setup for two years. Meaning that I replace my internal hdd's every two years.

And for active use, I have a memory stick of 1GB, usb2, which is always connected. I save all my work on it. As memory sticks have no rotating parts, and a lifelong guarantee (mine, or it's?)  it helps me sleep well.

Burglaring is of course a problem. Living in the city, in an appartment on the second floor, this is less of a problem than living in a mansion on the hill, but I do try to hinder possible burglars as much as possible.

Thanks for the idea to place a dvd backup somewhere else!

There are no Borg. All resistance is fertile.