I have never been a fan of external drives, if you have the space in your case, just grab a new hdd, $119 will get you about 1TB IIRC, install it as a slave and transfer the files onto that, then next time you have to reload an OS you will already have all the space you need for backups, also, internal drives transfer files way faster than an external usb drive...
I've always done what AR suggested, I have a 160Gb Raptor partitioned into two drives so that if I reload an OS I don't have to back up that much data, I then have a few storage drives (160GB, two 250GB and a 640GB), one of which contains a "setup" folder that stores all my program installation files so that I don't have to waste time downloading and can just install programs and drivers...