The bigger the better...
I have a WD Elements (850G), and have had no problems with it. Throughout the years, various drive manufacturers have had various reputations with ups and downs. Western Digital, Seagate, Hitachi, Toshiba are all decent brands.
Factors I'd consider -
3.5" vs. 2.5" - the 2.5 fits in a smaller space, but typically has a lower capacity;
speed - 5400 vs 7200 rpm vs 1000 rpm - most inexpensive drives are 5400 RPM (slowest). As the file sizes get larger, the 7200 or 10000 may be worth the extra C note.
capacity - while it is amazing how much you can store in 250G, the 1T drives are in the sub $125 range, 2T and 2.5T drives are available. 15MP+ is typical for new digital cameras, and shots at 20M each can chew up lots of disk space quickly.
USB 2.0 should be fast enough and universal enough to work with most op sys's. A faster interface doesn't help if the limiting factor is the drive's 5400 RPM speed.
I copy pictures directly from the camera to the USB drive, edit them there, etc. I really don't see any significant difference between that and my internal hard drive. As warned by the bad experiences posted here - be sure to make / keep / test a backup. By test, I mean occasionally go to your backup media and attempt to restore a file. After all, the purpose of the backup is to retrieve things from it - not just to make it.
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