I don't know much about video either so I can't tell you if you need an external or internal, which is better?
But I can say that you should consider a RAID 5 (mirroring and striping) or in the least a RAID 1 (mirroring) setup. And you need fast drives 7200rpm SATA II should do the trick. You don't sound like you'd like to spend a lot of money but I would invest in lots of storage space since video can fill up hard drives fast. You can always render your finished product to an offline product such as a DVD but consider truly that you will need a dedicated hard drive array for video editing that you don't store anything else on except the footage files during your edit. Check the Adobe Premiere Pro CS5 tech specs for further information.
The only practical (i.e. full speed) way is to use an eSATA drive interface drive. You might need at a minimum a connector panel if your computer does not have an existing eSATA port. You failed to mention any details about your computer so we cannot give you much info until you do,
Read Harm on drive setup http://forums.adobe.com/thread/662972?tstart=0
- click the embedded picture in Harm's message to enlarge to reading size
For external, you need eSATA or Firewire800... anything else is too slow
I have a ZT Affinity 7244Xi-3 Desktop.
Intel Core 2 Quad Processor Q9300 (2.5GHz, 6M Cache, 1333MHz FSB)
Windows Vista Home Premium 4GB RAM
500GB SATA Hard Drive, Integrated GeForce 7050 GPU
Temporarily I am editing off of a 500GB myPassort USB hard drive, and the speed has been fine, if I do color correction last.