If you find 2.5in hard drives to be too small and too expensive, there's a light at the horizon, as Team Xecuter has released as 2.5 to 3.5in adapter for the PS3.
Sure, it doesn't allow for an internal drive, but with the cost difference of a 3.5 compared to a 2.5in hard drive, it might be worth having an ugly box sitting next to your PS3.
The PS3 HDXT as it's called costs $26.39 and there's even an option for a SATA to IDE adapter for older drives to be used with it.
You can buy one here