I recently bought a half-terrabyte portable USB drive, already have 50% of it filled. It's never big enough. However, instead of doing tons of DVDs I still think it's better to use hard drives, as long as you use a second hard drive to back up the other which you use. And keep it cool so as to extend its life.

It's also really easy to 'add' Linux as a new partition to an existing WIndows system. Most Linux distros I've tried lately have good and easy deployment tools to re-partition the drive if there's room without loosing the Windows partition data, just makes it a little smaller so there's 8-16 Gig for the Linux distro. That's if you install the thing. You can also just boot from Linux live CDs.  Pick up a Linux magazine at a nearby bookstore and you'll have latest versions of at least one or two Linux distros. $12 well spent.