It will slow down your system if you fill the hard drive with it, but as long as you have a pretty good amount of HD space, it will work fine.
I personally use a few 500GB firewire drives to store videos, photographs (photographer), and then create alias's (windows equivalent of shortcuts).
Or just delete videos that you dont watch. I did this when i had them on my macbook HD and i gained 10 GB of space. You can always download them again, or just watch them over the net (
www.watch-movies.net)