Upgrading OS (backing up, etc.) questions

I have a family pack copy of snow leopard, and I am interested in upgrading my computer's Leopard installation to Snow Leopard, but first, I want to back up many of my files. I am getting an external hard drive, probably a western digital 320 gig something or other (my computer's hard drive is 160 gigs, so space shouldn't be an issue).

Of course, hopefully the upgrade to Snow Leopard will work without a problem, and I won't have to restore anything from backups, but accidents DO happen...

I guess my main question is, can Time Machine back up all my music, word files, movie files, applications, etc., without backing up the whole system of Leopard, so that I can then bring all those files into Snow Leopard with no problems? Or do I need to manually back up all that stuff, and then once I am in Snow Leopard, bring it all back?

For future reference of just making sure I keep everything backed up, is a Time Machine backup good enough? Or should I manually back up every paper I write for school, in addition to every media project I do, and all the music on my harddrive?

Is there anything I may be over looking?

Thanks!