If you are using Windows only in VMWare, you can format the drive as HFS+ and VMWare will handle making it work with Windows (basically, VMWare makes it appear as a network drive in Windows). If you want to access the drive in bootcamp, you will probably want to format it FAT32.
Personally, I have a 1Tb drive in an enclosure hooked up to an eSATA Expresscard. This is the fastest and biggest possible setup you could get (they go up to 2Tb now).
I have this drive:
http://www.newegg.com/Product/Product.aspx?Item=N82E16822152102
This enclosure:
http://www.newegg.com/Product/Product.aspx?Item=N82E16817106097
and this eSATA card (it needs no drivers in Leopard and is in theory bootable):
http://www.newegg.com/Product/Product.aspx?Item=N82E16839228002
Total cost: $158
If you don't want an expresscard, you could get a Firewire 800 enclosure, but they are expensive and faster (1Tb+) drives will max Firewire 800 speed. I have this one for another drive:
http://www.newegg.com/Product/Product.aspx?Item=N82E16817198004
At $60 after rebate, it is about as expensive as the expresscard, but slightly slower, and if you want to get a second one sometime, you won't be able to save $30 by already having the expresscard.
Anything connected by USB will be limited to about 33mb/sec, compared to 100mb/sec for Firewire 800 and 250mb/sec (faster than any drive you can buy) for eSATA. The difference between Firewire 800 and eSATA will not be noticeable to most people, especially if your drive is not that fast (most drives under 1Tb will not max out Firewire 800), but USB will be noticeably slower for almost any drive.
If you want to get a 2.5" drive (portable and requires no external power), USB is probably fine. You can get a 2.5" USB enclosure for about $15, while a Firewire 400/USB (a bit faster) one is $35, and a Firewire 800/400/USB one is something like $75.
Of course, you could always just buy an external drive that is already in an enclosure. Most of them come with USB, which will be slow. A lot of "mac" versions have some form of firewire, which is why they are more expensive. If you get one with eSATA you can upgrade by buying an expresscard if you decide it is too slow.