Hi,
If you don't mind I'd like to offer a different point of view. I think moving your media to an external HD is a great idea, I also think having a Time Machine drive is a great idea however they _should not_ be on the same drive. The rationale is pretty simple, if that drive crashed you would not only lose your media you would also lose it's backup. I would recommend investing in a high quality external HD for your Time Machine drive. I would then recommend you get a less expensive 2nd HD for your media. That way if either drive crashes you have a backup to your media which for most people is the most difficult to recreate.
The reason I mentioned getting the largest HD you can afford for the TM drive is it will eventually fill up, so the larger you go the longer it will last. Your iMac has a 500 GB drive, the question though is including the media you are going to offload currently how full is it? Take that number and a good rule of thumb is you need something 2-3 times. I think anything in the 1 -1.5 TB size should be OK.
The strategy many on these forums use is something like this:
1. Internal HD on computer is used primarily for the OS and not critical files.
2. External HD #1 is for media (photos, music and video) and critical files.
3. External HD #2 is for backup using TM.
4. External HD #3 is for a bootable clone of the HD. *This is a backup to the backup and is also bootable, so if the internal HD crashes you can be up and running in minutes not days.*
There are many backup strategies out there, what is right for me isn't necessarily what's right for you. I'd recommend reading
this article from MacWorld that discusses backup strategies so you can help find what will be right for you.
Roger