I have a 3TB HDD drive for my music, DVD rips and torrents, and an external 1TB HDD for back ups. I only back-up my music and DVD rips, since otherwise I would need another external hard drive. I'm still emotionally scarred from Piisu's HDD failure, I don't want to experience it myself.
I organize my music the same way most of the others do:
Music
>> Lycaon
>>>> [2008.03.19] RED RUM
>>>>>> 01 RED RUM.flac
>>>>>> folder.jpg
I tend to keep the artist folders in a format that I can easily type with my keyboard, so usually no kanas or special characters there. Otherwise all my tags are completely romaji-free, if you don't count the album artist field. It's very useful to have the romaji in the title of an album folder, since Foobar is smart enough to let me search with that romaji!