I just got a 320GB Maxtor 7200 r.p.m. SATA II/300 Internal hard drive (which has jumper settings for SATA/150 mode which is 1.5GB/sec or SATA/300 mode (this speed setting is not compatible with too many motherboards yet) which is 3.0GB/sec). I wanted bigger but I can't get bigger because my Dell only supports up to two 320GB HDs. It runs great. I am using it solely for the purpose of re-ripping all my audio files as WAV from my CD collection.
Whatever you do, do not get an external. I spoke with three people regarding storage methods for audio the day I bought this one. All said they had problems with external hard drives and their media libraries. One said occasionally the media player forgets where it's pointed to and he manually has to point to those directories. Another said his entire media library became corrupt due to location of the data not having a fixed hard drive letter.
You are less likely to have these problems on a Mac but you could still have them, as the last of the three people told me. He also mentioned that his media player (iTunes) often asked to be pointed to the location of the music on the hard drive. This happens even if the hard drive is left plugged in and never removed. When you restart your computer, it still recognizes it as a removable drive and this confuses your media player.
My 320GB internal hard drive was advertised for $109.99 at Staples (the 500GB internal was $149.99), but when I got to the counter I found out it was on sale for $98.90. You can get an external USB-only 500 gig for $115, but it is not made for streaming of audio or video. For that you would need a 500GB Firewire external drive which is over $200, and even then you will still have problems with your media player locating your library.
So in conclusion, the internals will cost you just slightly more but they are the only way to go if you don't want a constant headache.
Oh, and by the way: I have an Iomega 500GB USB external hard drive I used solely for backing up business data. Luckily I have two o those same back-up drives though. After I filled up the whole hard drives with stuff over the course of one day, one of the drives has been sitting in it's box on my shelf not being used for the past 8 months. I took it out to use it the other day [to pull some data off of it] and the hard drive is basically dead. One out of every 5 times the computer will recognize it, spin it up, and then 10 seconds later it will spin down and the blue LED goes off and the drive unmounts itself. The other 4 out of 5 times it won't mount at all. I think this is just a problem with the power supply in the enclosure or perhaps the USB board (and luckily not my data) but it doesn't matter since I can't access it now. If it weren't for that second back-up drive, I would be in a world of problems since all my customer data is on them.