I'm looking for a new external hard drive as well. My current one is only 300 GB and is running low on space.

I'm planning to hook up the new my one to my dark knight ASUS router and use it as a cheap NAS.

My concern about getting a 1 or 2 TB hard drive is reliability. I have heard these drives don't last as long.
What is the reliability on 1-2TB these days? What brands should I be looking at?

As I said earlier, I have a 1TB Lacie external HDD and a 3TB WD My Book Essential and they both work flawlessly for the past 4 and 3.5 years, respectively.

The Western Digital ones are considered to be of the most reliable/ best that one can get - I've been using WD HDDs, both internal and external, for 10 years now and have yet to be let down - even my 80GB IDE HDD (that's the oldest) is still working in fit condition.
But I've also had very positive experience with the Lacie one and they're also considered to be among the best ones.
Samsung has also a good name, but I've only had one internal HDD.

WD are very reliable on the whole. I have two 2TB externals that have been doing okay for the last 2 years.
I also have a Hitachi 1TB that has been going along for the past 4 years.

In what capacity are you using your external drives? Are they being used all time or just for once a month backups?

And I bought the Witcher for the gameplay :P

The Hitachi gets used about 1~2 a month to transfer data and images, while the two WD are to back up the data on my two internal back-up drives. So they are used about once every month or two.