Backup drives don't have to be expensive...so perhaps something a little bit cheaper would be in order. I do prefer to use TimeMachine and Backblaze on my computer with music, which gives me a good local and offsite backup, i haven't found the need to look elsewhere. TimeMachine can be restored immediately after a crash and i get the ability to capture snapshot style backups files as well.
There is a new feature in iTunes that will compress songs while you sync to any ipod/iphone to 128 AAC, which removes the need for a second copy or iTunes library... Depending on how you plan to use the iPhone it might be fine, car/office I tend to prefer the lossless files, but jogging, taking the bus or noisy environments 128 AAC is fine and does sound reasonable. BTW: You could use something like "max" from sbooth.org to convert to 256 or even 320kbps AAC, if you do want something a bit higher.
Even with 128 AAC, I still have way too many songs to put on my iPhone so I now just use one key playlist for the must haves, and then genius playlists for more random playback.
