How to manage a big itunes library?

This sounds like a good solution, and I see good deals currently on that WD Mybook. If you are planning to upgrade your Mac in the next couple of years you may want to keep the following in mind about Firewire drives.

Apple just phased out Firewire in their new aluminum MacBooks. So far their other current models still have Firewire, but there is speculation that they are planning on eliminating FW from their other model upgrades. See this article:
http://pogue.blogs.nytimes.com/2008/10/30/the-macbook-makeover/?em

If you think the hard drive to PC via firewire sounds good... you should hear firewire to dac. WOW...

USB was never intended to transmit misuc. Firewire is.

Hopefully, the omission of Firewire 400/800 from the MacBook might just be a prelude to newer Apple devices utilizing Firewire S1600 or Firewire S3200.

I've never been a fan of USB. USB 1.0 was terrible, but 2.0 is better. It'll be interesting to see how things sort once USB 3.0 is in mass usage.

In pure performance terms Firewire S3200 and USB 3.0 should be almost 4 times faster than current Firewire 800, so it'll be interesting to see how they stack up in real world usage.

Are there any DACs that can utilize a fibre channel equipped Mac?

The best solution would be to use a networked attached storage chasis, onboard RAID controller or expansion slot based RAID controller and build what is called a "RAID 1" array.

RAID stands for redundant array of inexpensive drives. Raid level 1 is designed so that all of your data is recorded to one drive and is automatically mirrored to the second drive. In the event that one of your drives fails, you can rebuild your array and recover all of your data by just replacing the single drive.

This requires two identical enterprise class hard drives, in this case I would use either two 750GB drives or 2 1TB drives and RAID 1 them for a secure vault for your music files. Both drives would have to fail simultaneously for you to loose data. Note that your total storage capacity remains at 750GB or 1TB, depending on the size of the drives used, because the second drive is merely a mirror of the first.

This is how IT professionals store data securely--although they do it on a larger scale. Your network and operating system will see the drive array as a single drive.

I should also note that you can use RAID 0 to create a single logical drive with the combined storage capacity of multiple drives and then mirror that array to an identical setup in RAID 1. (RAID 0+1) So you could chain together, for example, two 1TB drives in RAID 0 creating a single logical drive of 2TB and then create a second RAID 0 array made up of two identical drives, and then use RAID 1 to have the second array mirror the first for security.

The point of RAID 0 is that you can use the drives you want to create the capacity you need. You could take your four 250GB drives and create a single 1TB logical drive. I only point it out because sometimes large capacity single drives are expensive and it is more economical to use multiple drives. In addition, sometimes single platter smaller drives are more reliable, run cooler and quiter, ect. This provides flexibility.

Note however that RAID 0 has double the mean failure rate of a single drive. However, if you also mirrored the array or otherwise backed up your data this would not be a big deal.

All of the arguments against using RAID setups are well taken but it is an option that provides flexibility and ease of use in that the result is an entire music library on one logical drive and a built in backup system to guard against drive failure.