The best bet to keep costs down, would be to have another hard drive put in. Doesnt even have to be large, a 10gb or 20gb hard drive would do to store rotating backups on a seperate mount.
Even if HD1 crashes, in most cases you will still be able to swipe it, reinstall, and keep data on HD2 and copy over.
However there are some rare cases when both HD's may go bad at the same time, or some other catastrophe happens to cause backups on 2nd hard drive to be lost. In which case it may be smart to ALSO have an offsite backup somewhere. Either on your local HD or another server on a different physical network. This would also help if instead of HD's going bad, your entire server just happened to go offline for an extended amount of time, etc.
Its really your choice, depends on how much precaution you want to take. I have found though that for minimal protection, it really does help to ATLEAST have a 2nd hard drive to store .tar.gz's.
I'd say, setup a RAID-1 to avoid hardware data loss. Then setup a CVS server and redump and cvs update; cvs commit or even rsync. That way you only have to transfer the patched version across to your external server. This would mean that you could probably do daily sync ups without insanely high amounts of bandwidth being consumed.
If your looking for least expensive, implement a solution that backs up to the second hard disk, and ftp's you the file. Perlboy's suggestion is a damn good one, means you are not continually reproducing your data, and you can jump back to anypoint quite easily