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320GB for $99 on NewEgg. What more do you want? Free?

Personally, I'll opt for a 7200RPM drive with a 4ms access time, which means less space for more money, but faster access is worth the premium, even if it is only measured in seconds.

The backup feature is only for restoring your entire HDD image; it doesn't allow you access to individual files. I keep a back up of my PS3 drive on external HDD and it's just an archive: the files inside not user accessible.

The XMB directory reads: PS3 -> EXPORT -> BACKUP -> 200806282024
When viewed with a Mac, the archive files within folder 200806282024 show up as... archive files (archive_00.dat)