I use a Maxtor 250Gb OneTouch external drive, connected via firewire (it comes with firewire and USB2 conections).
It's simple to use -- just looks like another fixed drive so far as XP and 98SE are concerned. It has its own power supply and on/off switch, so can be powered down when you're not using it. Installation was simple -- had to install drivers for 98SE, I think, but not for XP. Comes with its own backup software, but I just drag and drop using Explorer.
I haven't used it enough to speak about its reliability, but so far it's always there when I want it.