I guess that really depends on what you want out of it...
You can go with another LS-XHL and run a backup over the network, or you can go with a USB drive.
If you go with a USB drive, you need to format it FAT32 or XFS (or ext3) to perform a backup to it (you can format the drive using the LS). If it is formated to XFS or ext3, then you will also be able to have write access to the drive over your network.
Hope this helps