You could probably do it with one of the many utilities out there. When the iPod is in Disk Mode, it's just like any other external hard drive so any utility that you'd use with an external hard drive should work fine with the iPod.
I have a 40GB iPod that I don't really need for music, but I use it to backup my Home directories. Between my work, home and laptop I have three systems and once amonth or so I get it out and just drag & drop my home directory onto it, from each of my three systems.
You could probably do a search on these forums for Backup information, or try Version Tracker or whatever for backup software. The fact that your external hard drive is an iPod is really irrelevant.
She who laughs last -- probably made a back-up.
While you can boot off the iPod, IIRC there's a caution about 1.8" drives not being made for heavy-duty frequent access; in normal use, the iPod only accesses the drive long enough to reload its RAM buffer. So if this is still true (I remember reading about it when iPods were spankin' new), it seems you should only boot from it occasionally/on an emergency basis, and not subject it to any other high-stress use. I don't know if running backup software counts as "high-stress".