This is what we did to expand storage on my friend's laptop.
Bought an 80 Gb 2.5" USB2 drive
Used Exact image to transfer everything from the internal to the USB drive.
Swapped the innards of the USB drive with her internal drive (very easy, and takes about 10 minutes).
That way she ended up with a large internal drive with no extras that needed to be permanently connectd, and a useful external drive for archiving stuff.