Dave- I use the external drive as an extension of my laptop. I find that a firewire drive slows the processor down a bit less, and it's more convenient to keep everything seperate, as you end up with some big files after a while.
Honestly, for what you're talking about doing, I don't think the Omega is the best choice. It's not huge, but still a lot more work to setup and deal with than an all in one, especially if you're doing it yourself while playing.
That being said, if you don't mind the setup, it does work and sound great.