I currently have two 1 TB HDD running in a RAID 1 configuration. I am looking to buy a 120GB or 128GB SSD. Would it be possible to keep my SSD as the main drive for OS and frequently used programs, and to keep the other two HDD in RAID 1? Would there be another set-up that would make more sense or am I better off just using two drives: SSD for OS and frequently used programs and HDD for everything else?
What you're proposing is an ideal configuration for speed and data redundancy. Your OS/programs will run fast off the SSD, and your data can be accessed off the HDDs. The RAID-1 gives you redundancy against a single HDD failure.
One thing you need to be cautious of is ensuring you have adequate free space on your SSD, since SSD controllers have TRIM/GC functionality that uses that free space to keep SSDs performing well.
The reason I flag this up is that a new install of Windows 7 will take up a modest amount of space, but over time, Windows Update will eat up space.
I'd recommend you keep the SSD filled up with a newly installed OS and programs upto about 40-60 GB, so over time it can grow, without reducing free space to the extent that SSD housekeeping is affected.
An SSD plus two hard disk drives in a RAID array is a typical configuration for enthusiasts interested in RAID arrays. The most common questions at this forum are about one ssd and two hard drives in a RAID0 array instead of a RAID1 array.