A little over a year ago, I was in need of a new router, and also just had a hard drive fail on my primary mac (with my last hard backup being done about 3 months prior - oops). I picked up a 500 gig TC, and don't regret it. I think I paid 299 for it at the time, which considering the N band router, and cost of HD's, wasn't really all that bad a price. Sure, if you look at the cost of either item by itself, this costs more than other options - but, it's *fantastic* not having to worry about backups. I also use it as a wireless print server, so all of the computers on my network (macs and work pc's included) can print without problems (and it keeps my noisy laser in the basement, where it doesn't bother us).
But honestly, it always comes back to the ease of backups - I don't have to worry about remembering to plug in an external from time to time (or more importantly, my wife remembering to plug in an external from time to time) - I don't have to worry about anything - it just does its thing.
Now, when my new mac pro shows up (hopefully today or tomorrow), that will get an internal drive dedicated to backups (faster, cheaper), but I'm okay with that - not only do I have other macs on the network that will still need to be backed up, I really needed a decent router.
Anyhew, my decision to buy the 500 gig was based on the relative ease that the HD can be upgraded in these - I figured if I ran out of space, down the road I could just replace the drive (at a far cheaper cost than the price difference between the 500 gig and 1 tb were at the time). Here, a year later, it's starting to eliminate my older backup files (which doesn't bother me), and it's been backing up a 320 gig hard drive (which is mostly full) - it's been a great purchase. And knowing that my pictures (~19,000 family pics on the computer) are safe is worth it to me. Raid on my backup didn't make too much sense - there's a lot of extra cost involved, and you're only protecting against the odds that both your primary drive and your backup drive (located in different areas) are going to die at the same time... I'd rather save the money and have a single drive for backup, personally.