Well the convenience of having a larger internal to minimize the number of times you need to lug around the external (although small and without a power cord of course) still has me sold on the internal upgrade. That way you lose nothing since you can still use the old drive as external when needed.
In addition to the bundle that my favorite Mac parts supplier OWC sells, watch your ads from Circuit City and Best Buy too. They have been running specials on the Western Digital 250 Gb Passport Essentials external drives for $99. Using one of these (and probably others, but I have done this with two Macbooks and WD Essentials) you have the best of both worlds. The 250 Gb drive in them is a WD Scorpio 250Gb SATA drive- perfect to replace the internal in you MB. So, just open it up and pull the drive out- then pop it in your MacBook and put the old internal you just pulled out back in the WD External case and you have it made with a 250Gb internal and a smaller external as a bonus!