You should *really* look into RAID-5. It's perfect for your needs.
Regardless of how many drives you have in a RAID5 array, only the storage from (1) of the drives is dedicated for redundancy, yet ANY one drive in the array can fail and you can still get all your data.
For example, if you had a 6-port RAID-5 card with 6, 250GB hard drives attached, you would have a filesystem with 5*250GB = 1250GB of storage. Any one of those drives can fail and your data is all still there. Just make sure to get in there and replace the faulty drive before another fails! (2) failed drives WILL lose the data. The best idea is to just shut down the server until you can put a new drive in. Some of the cards I have listed below even support a hot spare drive, so that if one of the drives in the array fails, it automatically starts rebuilding the array using the extra drive. This way, a full 3 drives would have to fail very close to one another before you lost all your data!
For RAID-5, you need a minimum of (3) drives. One of the nice things is that if you buy a RAID-5 controller with 6 or 8 or 12 ports and just start with your 4 drives in it, you can upgrade the storage on the fly.
So for instance you start by connecting your (4) 250GB drives in RAID5 on a controller that supports up to (8) drives. This gives you 750GB of storage to start with, and if you decide in 6 months that you need more storage, just add a 5th 250GB drive and you'll have a full 1TB of usable storage!
And even if you have something ridiculous like 16 drives in a RAID5 array, you'd have 15*250GB = 3.75TB of usable storage, whereas those same drives in a bunch of RAID1 arrays would only be 8*250 = 2TB.
The read performance on RAID5 is comparable to drives in a striped RAID0 array, the write performance is about the same as if you had a single drive (also about the same as a RAID1 array), you still get the protection from one of the drives failing, AND you can upgrade your storage as you need to!
For RAID5, you definitely need a controller card that has "hardware assisted RAID5". These typically come with small RISC processors on the card or have a special XOR engine for calculating parity -- this prevents the main CPU from being used for all the calculations.
For P-ATA RAID5, I'd recommend looking into:
* Promise SX-6000 (up to 6 drives)
* Highpoint RocketRAID 464 (has support for up to 8 drives, but only 4 channels -- performance would be slightly degraded for more than 4 drives, but this should be fine for the type of storage you're describing that doesn't need extremely high performance, since you're going to be limited by your network connection anyway)
* 3Ware Escalade, versions: 7506-4LP, 7506-8, and 7506-12 for up to 4, 8, and 12 drives respectively.
Another interesting product:
* Highpoint RocketRAID 1820A (NOT the 1810A) -- This is a SATA raid controller with 8 ports. The interesting part is that you can use their "RocketHead 100" converters to connect regular ATA drives to the controller. These converters seem to go for about $10 shipped on eBay. The advantage of this drive is that you can attach your (4), 250GB PATA drives now via the converters, then buy SATA drives in the future as they become more cost-effective.
Keep in mind, though, that with any RAID solution, the entire array will perform according to the slowest / lowest storage device in it.
For instance, if you have (5) 250GB drives and (1) 100GB drive in a RAID5 array, it's no better than just having (6) 100GB drives -- you'll only have 500GB of usable storage.
With such a nice fileserver, you should REALLY consider buying a small gigabit switch and a few gigabit ethernet cards. Transferring huge files when limited by 100mbit (that's only about 12 Megabytes/second, max) gets annoying -- trust me, I've been there.
If you shop around and wait for good deals and such, you can usually get gigabit ethernet cards for less than $15 apiece -- granted they're probably not the best of the best, but DEFINITELY better than 100_base.
A 4-port gigabit router could be had for $50 - $75, and you could keep your WRT54G attached to the network as well, if you wanted. Just connect the cable modem / DSL / whatever directly to the WRT54G, then run a network cable (might need a crossover cable, might not) from the WRT to the gigabit switch and then cables from the gigabit switch to computers that will likely be accessing the server (and to the server, of course). Anything attached to the gigabit switch with gigabit cards can use gigabit speeds, and anything attached to the WRT can still talk to the fileserver or any of the computers on the gigabit, but will be limited to 100mbit speeds.
Anyway, I hope I've been helpful. Let me know if you have any questions.
Best of luck!
Nick