Can you make a backup of your harddrive if you have internal space on your machine? Does it have to be partitioned?
To answer one of your questions - yes, you can make a backup on the internal drive but IMHO there is not much point in that. If your internal hard drive fails, which is why you want a back-up in the first place - then the back-up that is also on that drive won't be available either.
Well, there is a chance it might be, but not likely - depends what the failure is.
I don't know how much the labour cost is to replace the internal drive in your iMac for a bigger one. If it's reasonable, you could go that route and take the drive that was in the iMac (the one you are using now) and put that into an external enclosure and thus make your own external for back-up of critical files only.
O r you can just leave the internal drive alone, but whatever size you need in an external one and partition the external one into either two or three partitions.
One or two partitions would be for straight back-up (I use two so I can alter back-ups between them) and the other partition can be used for all the extra storage you need.
The external drive partitions will show up on your Mac desktop as little drive icons like these:
These are two physical drives - one with three partitions, the ones with the firewire symbol on the icons (the symbol with the circle in the middle) and one drive with one partition (with the USB symbol on the icon).
Each partition of a drive shows up with a separate drive icon, so by double clicking on it, you can just open that drive partition and do whatever you like with it - the same way as with your internal hard drive.
I use the USB drive to store videos and movies and the firewire partitioned drive as backup for my two internal drives.
I think the key thing for you to decide is exactly what you want to do and how much space you think you need.
You can of course always add more drive space later.
One really nice thing with the Mac (not sure if Windows can do that, I get conflicting information) is that you can actually boot from any external drive that has the OS on it if it's set up right.
So if your internal drive ever fails, you can start up holding down the Option key on the keyboard and all the drives (internal and external) that you can boot from show up on the screen.
You just pick one and hit continue and the Mac will use the operating system of whichever drive or partition you chose.
I use that when I go visiting - I just take my backup drive with me, connect it to my friends Mac, boot up with my hard drive that I brought and everything is exactly the same as if I used my Mac at home.