I think you got most of the answers above, but figured I would throw a couple of things out.
Not sure if you know people in the States who can bring you drives or enclosures, but other good cases include those from firewiredirect.com and wiebtech.com. firewiredirect.com has a FW 800 Raid-0 that is set by jumper and does a real nice job. Though SATA/eSata is better, I can get very good throughput on this setup.
And 750 Gig Hard Drives have dropped alot in price, though a bit more of a premium on the pricing as compared to 500 Gig Drives. Seagate makes very good drives, and I tend to buy them when I can, though I do pick up some Maxtor and Western Digitals from time to time.
Of course people have different opinions on brands, but I would never let anyone buy a Lacie Drive if I could stop them from doing so. They have alot of issues (at least they have for me) - they are the only drives I have ever had fail (touch wood) - 3 of them went down like dominoes. Warned my friend about them and he did not listen. 6 months later he had to buy DataRescue. (The Lacie Fastcoder is a good little gadget and my Lacie PMCIA cards for my Powerbook are fine, so I am not bashing Lacie, just relaying my own experiences with the drives
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Also, if you are using FW to write to the storage drive, make sure to get a PCMCIA card for the FW out to the drive. You do not want the FW in and out on the Powerbook to be on the FW ports on the Powerbook. Makes capturing more reliable
You are fine running the app form your hard drive. Though if you have the original stock drive (not sure which PB model you have) it has a 4200 RPM drive with little cache. Not sure what your budget is, but if you can get a 5400RPM with a larger cache in you will see a big improvement. The jump from 5400RPM to 7200RPM is not as dramatic performance wise if you are trying to save money, but if you can get 7200RPM, go for it. Also max out your RAM
If you can set up to edit to have a scratch disc for rendering, the assets on another drive and your system and app on the third drive, it gives the best performance. Try not to use your Powerbook drive for scratch or assets if you can avoid it.
Also make sure to keep your system drive at least 20% empty. The more room on the system drive (and other drives in fact) open the better. Usually you can start seeing a performance hit at around 80% full give or take.