Running a 1Tb Iomega* external which has caused no problems whatsoever except the usual issues with some BIOS not "agreeing" with the drive in the USB port on bootup so the computer doesn't boot. Dunno why that happens, seems to be "hit and miss" as one computer here has no issues but another just won't start at all.
But why another external, why don't you fit another internal hard disk of whatever size you feel is useful and just use your external for important backups?
(*Why that one? Price, got a good deal)