External Hard Drives and SharePoint
I have used both types of external drives (USB2 and 1394 connections) for my SharePoint images and the USB2 drives always perform better than firewire drives
for me. 1394 drives sometimes give me headaches after restart and I basically have to unplug and plug it back in ,so keep this in mind as the first tip.
SharePoint is a resource intensive product and on the top of that a virtualized SQL server adds too much overhead so you can never expect
the same performance and transfer rate you get with IDE/SCSI.None of the existing external hard drives are meant to give you such a performance.
If you are performing backups as well then consider getting two drives, one dedicated to your sharepoint images and the other one for storing your backups.
I will never store backups side-by-side my images.A large external hard drive ( 250GB or greater) is necessary.
Remember, Most of external hard drives come pre-formatted so always check to see what file format is used at first place before you start creating your demo or non-demo images.
By creating a VHDs on FAT32 ,Virtual PC splits it to multiple files which may not be what you want so you have to take extra steps to merge them all.
At the end and for Vista Users in particular, always make sure that the external hard drive you are about to purchase has no compatibility issue with your OS.
I know some people who had problem hooking up their Western Digital 500 GB External HD and they are still stuck!