if you're backing up original DVD which i assume you are......the best way to go would be for any 1TB drive internal or external, and a PCH-a110 as your media player
suggestion kolang yan kasi plano ko din yan gawin sometime soon.
Reason> the PCH reads ISO files/images taken from your DVD, allowing you to simulate playing the DVD itself, preserving all the extras/menus of the original DVDs.
...now if you just want to watch the movies and save as much space as possible while having excellent PQ with minimal features, i suggest ripping vids using h.264, then the container is up to you. if you do decide to go this route the WDTV + 1TB is indeed the way to go