I would do as you indicate, buying a drive to backup to. You can use Carbon Copy Cloner or SuperDuper to do a nightly backup (or whatever fits your schedule). That would make the backup bootable.
If you have Leopard (you didn't mention what OS you have) you can use Time Machine.
Both Time Machine and CCC and Super Duper will allow a bare metal restore in a bootable condition. There are more expensive options such as Retrospect, but you'd have to find a PowerPC version and getting Retrospect to bare metal restore is an involved process.
Other backup options, such as Sugarsync, Dropbox, etc won't have anywhere near the capacity of your HD, unless you purchase a plan with them. And all that would be is backup. You couldn't do a bare metal restore from backup with those.
If you do not know what I mean by "bare metal restore," well here it is. Say your drive dies and all you have now is your backup. A bare metal restore allows you to grab a new hard drive, install it, restore from the backup and be right back where you were with a bootable hard drive and all your files intact.
Simple backup, such as what you'd get from a cloud service requires that you replace the bad drive, reinstall the OS, set everything back up again and THEN restore files. Depending on what you've backed up to the service this could be a lengthy process.