Ooo, interesting thread! A lot to say here.
First off it's quite clear to me that the problems most people are having with RW media stems from believing the hype about "drag and drop, use it like a floppy". That was my first thought reading the very first post and it became increasingly clear that was the case as I read down. Those who have no problems with RW's (like myself) use it through a regular CD/DVD burning interface like Nero, those who do have problems are trying to use InCD, etc. Folks, the thing is InCD and similar programs *tell you* that they can't necessarily be read on other machines! In fact InCD has a special "InCD reader" thing you can install on computers that don't have the full read/write suite on them, just so you can read the disk. The fact is that this kind of read/write/multisession/use-as-a-regular-disc technology hasn't been perfected, much less standardized. So any disk you make with any program - whether it's Nero or Adaptec's version of direct CD writing, or the one built into Windows XP - is likely to have problems being read on another system. Your best bet if you know other systems are going to have XP on them (possibly a reasonably safe bet now) is to just use the built-in burning functionality in XP. InCD doesn't really offer any advantages over it, and what's worse it is all but requires a special reader engine be installed in other computers.
OK, moving on. Scott, have you considered that your experience of DVD and other optical media might be just a tad biased by such an extensive experience in the support field?
I'll bet you mechanics who work in Honda shops could tell you about millions of stupid problems that happen all the time with Hondas, but they're still demonstrably some of the most reliable cars on the road. Likewise if you look around for opinions on the 'net you'll often find actually *more* complaints about Honda, Toyota, etc. cars than others. The reason however is not because they are more problematic, but because A: more people buy them than a lot of other cars and B: more of those people expect extreme reliability and thus they have higher standards for how reliable their car should be. Some people go a little too far in believing the Honda/Toyota reliability and expect that they should just never have to change oil or even do regular maintenance.
That being said it is an inevitable fact of life that increasing optical media densities will mean decreasing media reliability and tolerance to damage, given that the disc size remains the same, the data density increases, and the damage causing factors remain constant. In other words DVD discs are not less likely to get scratched and since they have more data in a given area any normal-sized scratch is bound to have a worse effect on a DVD as compared to a CD. And yes folks this will only get worse with HD-DVD and Blu-Ray. A *lot* worse in fact. This is probably one of those "dirty little secrets" that the industry isn't going to talk much about, yet I could easily see it becoming a class action lawsuit in a few years.
One of the big things the HD-DVD crowd was talking about as an advantage over Blu-ray was that HD-DVD has a much thicker protective layer on it, meaning it should be more durable. Blu-ray is apparently fairly fragile by comparison, which is why a lot of earlier prototypes, and the higher density discs in general (50GB), show a protective sleeve on Blu-ray discs. My understanding is that this is not standard and probably won't be used in normal Blu-ray discs. I'm not even sure the players coming out now are compatible with the sleeve/cartridge. If anyone has more info about this I'd love to hear it though as I'm really not sure this is the case.
At any rate it's true that DVD is not a good candidate for backup for a few major reasons, mostly already mentioned. First, the average user doesn't really have that much stuff they truly need to back up. Sure you want all your music, which a lot of people do keep in digital format now - everything you've *bought* from iTunes, etc. in particular. This stuff *is* worth backing up. Most people however haven't bought more than 4.5GB of music. At iTunes' current rate and a few MB per song that's a fair load of cash.
Other than that most people don't have a lot of large stuff to backup unless they're unsensibly backing up their entire drive, with multi-gigabyte games, applications, etc. installed. So for most people 1 or 2 DVD's should be able to back up their entire system.
Still there are many power users like myself, Scott, and others here that do have 10's or even 100's of gigabytes they want to backup, either regularly, or at least once and then do incrementals on it going forward. Even one marathon session of burning 10+ DVD's will put you off it for a while. As Scott said the data rates, if nothing else, are just not that great. Even with high speed media and a quality drive it takes 30+ minutes to burn a DVD if you have data verification on (and if you're doing a backup you damn well better!).
Then there is the much more serious and wide-affect issue of data integrity and vulnerability to damage. As discussed above DVD's just aren't as durable as CD's for a given amount of data, because that data is packed into a smaller area and thus for the same size scratch more data will be lost. Scratches haven't changed size lately, so we're bound to be at greater risk with our data. If you're doing backups your best bet is to get some nice, soft-plastic DVD-type cases (believe it or not the hard plastic CD cases, as well as the "soft" binder-style CD/DVD cases can both damage your discs) and then keep the backups on a shelf, in a closet, or better yet in a safe, never to be used again unless absolutely needed. Keep at least 4 generations of backup around. If you're using RW's (which is not a bad idea for those doing regular backup), then you start with 1 disc, when you get to the 4th disc your next backup goes on the first disc again, and you continue rotating like that. If you're doing rotation it would generally be advised to use more than 4 though, depending on how frequently you backup. And always keep an extra copy of your very first backup around.
Finally, we come to alternative backup methods. Unfortunately there really isn't anything that is both cost-effective and convenient to use. Hard drives really do come the closest, believe it or not. Tape backup continues to suck, being a linear backup system it can never do anything but I'm afraid. Well, unless you just don't ever use your backups (ideally you won't have to). If you do use tape backup you never want to delete anything you might use just because it's backed up. Retrieving it from your backup will be more annoying than you probably want to deal with. Tape is really only acceptable for pure backup mirroring purposes. I wouldn't use it for archive, for example. And it's also prone to deterioration over time, although so are CD's and DVD's. Yes folks, little-known to many, but if you just burn a CD and then stick it in a closet for a few years, it *will* deterioriate. Probably not to the point where it will be unreadable, but it's likely it will read slower due to more error correcting data having to be read. And the longer it's in there, the more it will deteriorate. Some people say 10 years, some say 20 or 30, for consumer-level writable media. Obviously factory pressed discs have longer lifespans, fortunately.
In any case hard drive does seem to be the best way to go, especially with drive prices getting quite reasonable. These days you can buy a 200GB drive for little over $100 and then get a USB/firewire external enclosure for another $30-50 and you have yourself a great big external drive. Alternatively you can just buy a purpose-built external backup drive for not much more (especially if you happen to catch a rebate - Seagate has a lot of them these days). 1 backup drive should do if you don't keep it connected all the time and keep it in a safe place away from your computer while you're not backing up (stick it in a fire-proof safe if you're really concerned, ideally away from the house). If you're really paranoid you'll need 4 or so drives *not* in a RAID configuration (all external drives, use them in a rotation as described with the RW's above). If your data is important enough to you, the cost shouldn't be a big concern. $600 or so and you should have all the backup you need for a good standard 4 generation rotation.
Speaking of RAID, I wouldn't trust it for "backup". That's really not its purpose. If realtime data integrity is of key importance to you then RAID is great. But it's designed for uptime reliability and running data loss prevention, not to avoid catastrophic failure (your entire computer dies due to power surge for example, or fire). Do *not* substitute any form of RAID for backup under any circumstances, and generally, for the average person, don't even consider RAID, the advantages aren't worth it for 99% of people, and the hassles and overhead cost will generally outweigh those advantages anyway. After all, which would you rather have, a $100 drive in your same vulnerable computer mirroring your data in realtime, or a $100 drive in an external enclosure, locked in your fire-proof safe away from danger with the same data? Do you even know what to do if/when one of your RAID drives dies? It's easy enough to just perform a restore from your external backup, but what about replacing a dead drive in your RAID array...