I recently went through this process. Here is what I did.
I bought a second hard drive, same size as my primary; not quite as fast, but less expensive.
I then used a GREAT program that you can download and try free for 30 days (then $35 to purchase). It's called Casper XP (designed specifically for Win2k and XP). It will make an exact copy--not a mirror--of your primary drive onto your backup drive. (I plan to do that once-a-month, and use CD-RWs for daily backup of important files).
I also purchased a hard drive drawer for the backup drive. After doing the backup, I just pull the second drive out and store it in a fireproof/waterproof box hidden in my garage where no thief would have time to look.
So...if any of these things happens--primary drive crashes, computer is stolen, house burns down--I'll be able to recover my business very quickly. Casper XP creates an EXACT copy of your primary drive, including operating system, etc., so if your primary just crashes (no big deal, right?), it would be a simply matter of unplugging the primary, replacing with backup, and rebooting. Presto...you're back up in 5 minutes.
Maybe some of these measures sound a little extreme, but if I were to loose all the work I've done over the last 10 years...I wouldn't know where to begin.
saxon