Which Setup?

RAID is not for safety from data loss. RAID is for safety from downtime. This is with the exception of RAID 0, which isn't technically RAID anyways since there is no (R)edundancy.

If you want safety from data loss, your best options in order from most safety to least are for a copy of your data to be stored at:

1) A location far away from your main computer.
2) A separate computer/NAS. The farther away from the original and less time this device is turned on the better.
3) An external USB drive case connected to your main computer.
4) An additional drive inside the main computer. Possibly in RAID 1 or greater.

Remember, if your power supply or some other device fries your main PC, any attached devices may go down with it, including your main and backup hard drives. A USB attached drive has a much safer chance of survival since it draws power from a source other than your computer's PSU. Also, using an old PC as a file server attached to your network is a great way to backup your data. This way you can possibly place the backup PC is another room to help protect from losing your data to fire/flood/theft. Also, you can easily backup multiple PC's to your backup computer.

Whichever method you choose (except for RAID), make sure schedule your computer(s) to run a daily/nightly backup to make sure you are actually backing up your system.

Personally I think your best bet is 2 x 750GB if that is an option. One should be used for backup. The other can be handled two ways. First, you could simply partition the whole drive as one partition and keep things simple. The other is to make two partitions. On the first one put the OS and all of the files that you use often and want good performance from. On the other, you can put archive data, pictures, movies, music, etc. The first partition will be on the outer portion of the drive which has much faster Read/Write speeds. Also, if you are not accessing the second partition then there will be lower seek times.

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I agree with the Raid talk. I do NOT see a point in Raid within a desktop AT ALL. It is really only advantageous in a Server environment. With MAYBE some exceptions. I'd do this. Get 2 Seagate 7200.11 or ES.2 Drives, 750Gb if that is your size of choice. Format, lets say, 100GB for OS and apps, and the rest for Data. Take the 2nd one and put in a USB/eSATA external case and use it to perform backups. This way if your PC fries you can always restore and you feel good that its physically a separate device housing your data. When you are not backing up just power it off and unplug it. If you really want to be safe store it off site like at the office, assuming you have an office or desk where you are employed. Or somewhere else. I personally backup everything to a 250GB USB drive in such a manor. I do not take offsite but I might take my old 80GB drive and do just that.

Oh yeah and to add to this. Performance is relative. A faster Drive will only give you quicker access to data and load apps/games faster. Raptors just aren't worth it anymore. the 7200.11 drives have a 32MB cache and run right up there with a raptor but don't cost an arm and a leg.