I put another 160GB into my G5 (Seagate SATA, just like it came with) and also have an external Lacie 120GB drive (a few years old). When I was looking, I couldn't find a decent larger-than-160GB drive, but I see no reason why you couldn't get something bigger than that - just try to buy something nice enough that it's relatively quiet. The nice thing about putting only infrequently accessed files on the second drive (video, data, etc. - doesn't matter as long as it isn't used all the time) is that your second HD can put told to sleep when possible, reducing drive noise further (something you can't do if you store frequently used items on it, as you will either not allow it to sleep, or deal with frequent spin-up delays).
I tend to like putting video in external drives, as I could (in theory) chain as many of them as I want should I need more room, and I could move them from system to system. Any Firewire drive will have a fast enough connection for video. Plus, I can shut it off when not needed. Of course, it takes up more room. Trade-offs, always trade-offs.
You might want to start with a 160-250GB internal, as it's easy to install and adds no clutter. Be sure to have a backup solution for any edited video - perhaps the purchase of a bigger, slow, external drive might be good for this.