Hi
It's up to you really but personally I'd go for an internal drive as they're cheaper and don't clutter up your desk.
The hard drives are considered customer installable parts and instructions, including a QuickTime movie, can be found here:
http://docs.info.apple.com/article.html?artnum=75312
You need a standard 3.5" IDE/ATA hard drive. Make sure it is ATA rather than SATA (serial ATA). Your computer supports drives upto 120GB. You could use a larger drive, but you wouldn't be able to make use of the full capacity.
Installation is fairly straight forward, just secure it to the drive bracket using four mounting screws and connect the ribbon and power cables. You'll also just need to check the jumpers on the back of the drive are set correctly before installation. There are two rows of pins, one above the other, and by moving the jumper block to the appropriate pair you can set the drive to master, slave or CS (cable select). If you're replacing the existing drive, it will need to be set to master. If you're adding a second drive, it will need to be set to slave. The drive should come with instructions or a sticker indicating which pair of pins is which.
Personally I'd be tempted to get a couple of internal drives to replace your existing 10GB and external 80GB.
I'm assuming you don't have a SCSI card installed and aren't currently using a SCSI drive.
I hope this helps.