$349.99 is certainly not a bargain-level price, but it's appropriate for the amount of storage capacity you get. If you try to put 120 GB of data on MO disks or other storage media, you'd end up spending significantly more. DVDs are still out of the question because the corresponding burners are still too expensive.
The 120 GB hard drive used here is currently one of the fastest, and it is actually slowed somewhat by the FireWire interface - but this is not a real disadvantage, considering its performance of 25 MB/s. The drive is still a bit far from attaining its theoretical maximum (400 MBit/s is approximately 33 MB/s), however, based on past experience, it still gives a respectable showing.
In this regard, the use of USB 2.0 might possibly bring it one step forward (480 MBit/s); Maxtor, for instance, already offers external storage solutions for this new interface. However, according to our estimates, it's hardly possible to achieve more than 30 MB/s, so in practice, this makes very little difference.
For users on a more modest budget, versions with 60 GB and 80 GB are also available. Their performance is about the same, since these smaller drives are only insignificantly slower than the top model, and anyway, the interface is actually the bottleneck.
All in all, this drive makes a positive impression. Western Digital has taken a good product and successfully exported it over to another market segment. Hopefully, the extremely short period covered by the guarantee (in comparison to desktop drives) is merely a precautionary measure from the manufacturer, and not indicative of the product's quality.