If your notebooks have eSATA ports, you can connect them to the external drive, but only one at a time. Backup one, then the other. A little bit fiddly, but certainly do-able.
Otherwise, get a NAS (Network Attached Storage). Basically a server that provides file storage to every machine on the LAN. They come in all sizes and flavours, ranging from a single hard drive up to servers containing large numbers of hard drives. The speed would be (eventually) limited by the speed of your switch, as you suspected, but I think you'd find you could get enough speed over 802.11g if you get a fast enough NAS.
The nice part of using a NAS is that you could use backup software like the Windows 7 automatic backup software (I have forgotten its name, but it's like Mac's Time Machine).
I want the backup to be automated at like 3am everynight, so waiting for one to get through and the switching to the other isn't very appealing! I do plan on using the built-in Win7 backup software..
I've looked at the NAS option and even thought about buying a new router/switch (gigabit/N, like the Netgear N600) that has a built-in hard drive port (USB), but won't that option still be slower than regular USB2.0? I have an external USB hard drive I use now, and backing up to it is SLOW.. like 20 hours slow.. My esata hard drive can back up the same info in an hour..
arg.. Maybe the solution is to just get two esata backup hard drives, one for each notebook..
I was hoping for a single hard drive solution, that way if the house caught on fire, I could grab this one hard drive and know I had everything from all the computers (the notebooks are in different rooms) safely backed up..
First, use an online backup service for offsite backup.
If your data is really valuable then I suggest an even more rigorous backup routine such as different disks each night. Doing weekly and/or monthly backups and taking those offsite. Doing an annual backup, etc.
For typical home data having an online backup and backing up nightly should be enough.
Putting stuff on DVDs and keeping them in a safety deposit box or in another location should provide some security especially for photos and other irreplaceable things.