I have a 40gb external usb hd. You can copy everything that you want to back up to it. You can do a ghost image that you will be able to restore if you have a major PC failure but you will not be able to boot up from it.
What you need to do is to check the bios. Some of the new motherboards do have a setting to boot from a USB device, external usb drive. Have a look in the motherboard manual or look in advance cmos settings in the bios.
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