1TB Time Capsule us the way to go. It's the same price as an Airport Express with a 1TB external, but has the added benefit of keeping the USB port free for wireless printing.
I have one in my house. I have 500GB of TV shows and movies I've purchased through iTunes, and the rest is empty space for my Time Machine back ups. It's all on one disk btw. I suppose I could have partitioned it, but I didn't bother.
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