if you go external, make sure you get firewire transfer - it's way faster than usb and it'll help greatly when transferring large amounts at a time.
as for the size of the drive, it depends how your files will be encoded. mp3s don't dake up a lot of room, but they sound like shit. the way i rip my cds leaves me at approx. 2-3 albums per gb.
if you build your own computer, you can make it as simple or as complicated as you'd like, but you can build it to serve the exact purpose you want it to serve. i've built every computer i've ever had and i couldn't do it any other way. it's more personal.