If you pay attention to the various tech deals sites, you can find drives at really good deals. A week or two ago, people got 200gb drives for $25 from Dell, with the use of some rebates. You can often find them for $120 or so. (well, 220 w/ a $100 rebate.)
As for backing up, I actually think that an offline copy of the drive is better. Raid-1 gives you the benefit of redundancy, but you are using both drives the entire time. Additionally, your data probably doesn't change that frequently, so you don't really take advantage of having the data being kept redundant the entire time. I think that a better option for the backup is to just make a copy on a second drive and remove it from the system to keep it safer.
The other thing to think about is how much time is involved in performing all of your ripping. That time is worth money.
I know that I never want to have to rip my collection again (if I can help it.)
kiwi