I've read around a little bit and from what people have been saying should I just go out and buy the 320GB Western Digital Passport and swap the drive in the Mac with the external one in the case?
You can do that, but be warned that doing such voids your warranty of the external drive you're putting into your Mac. Moreover, a lot of external drives only have a 1 year warranty standard, whereas most OEM drives from WD and Samsung have a 3 year warranty, and Seagate has a 5 year warranty.
I would personally just get an OEM drive from Newegg and if you end up spending a little more, it's more than worth it because of the warranty.