Internal or external is another choice to be made, I suppose. External increases the cost because you need an enclosure capable of RAID. Internal is easier, provided your case has at least 3 drive bays (most do).
I keep all my drives in my case. I have a drawer full of 8GB and 16GB USB keys .. more than enough space for the portability that I require.
I also have a pair of 32GB keys that have all of my backups. All my writing, code, data, etc.. One is plugged into my PC and I have automated backups every 12 hours. I swap them periodically and keep the second on my person.
buy a shitload of small USB keys (1GB - 4GB) to which I backup individual projects.
And yet .. I do absolutely no system-wide backups.