I follow the "disk is cheap and getting bigger" school. I use XP. When I import I use the option to make a backup at the same time. I do this directly to an internal drive reserved for backups, this gets me the CR2 squirreled away should I ever need it. I convert to DNG on import.
The LR library and catalog get backed up every night to the backups drive. After significant changes I sync up with an external drive on another system (a Mac Mini so that I don't get hit on both systems by some weird Windows problem). Well, actually a pair of drives . I have a USB drive I sync up to sporadically as well.
I also use Carbonite to continuously backup the library to their online backup service, which has the handy feature of being unlimited storage.
Yup, I'm paranoid. Then again, if the house burns down I'm still covered. I see it as one of the benefits of going digital.
cheers, martin