Don't mess about - backup
everything, then do it again after upgrading to Snow Leopard, then do it
again after updating Snow Leopard to its latest release, and so on. If you're using the in-built Time Machine backup software, it'll automatically perform incremental backups once an hour - copying just the files that've changed on your drive with each new backup it makes. This is ideal, and you'll likely find it far simpler than any other backup solution (especially if you find you need to
restore any backups).
You never know when a disc will fail to read, or simply turn up missing. If your personal files are important to you, then you should be backing
them up on a regular basis anyway.
Be aware that Lion will remove Rosetta from your system, which will prevent you from running any PowerPC apps.
You need at least 200gb. They don't sell drives that small.
Even if you
do happen to find one, you're generally better off going for a capacity that's at least double that of the amount you reckon you'll want to backup. A 320gb drive indeed sounds ideal.
The
bare minimum Time Machine will accept is the amount of data to be backed up + 20% (a bit over 150gb, in your case), but even keeping in mind that further backups would be incremental, that'd only be good for
one backup. Going for double the capacity means you get a complete backup, then a whole bunch of incremental ones.