iMac system crash

My iMac crashed twice in the last 2 weeks. The hard disk is dead I think. I was thinking of replacing it, but after seeing what it takes, I guess I will go the external drive way. I can't believe it is that difficult to replace an internal drive (i miss my pc). I am looking at buying an external drive and install osx on there. I know firewire is faster than usb, but will i really notice a huge difference if I use a usb ?
Thanks for your help.

You need to tell us the flavor of your Imac,which one it is. As you may not be able to boot from an external drive.

And if it is a PowerPC iMac USB, even USB2 will simply not work. Should have purchased a tower as you can now appreciate there is a huge price to pay for the glossy compact machines.

Difficult to replace HDD and optical drives, can't upgrade graphics, not so easy adding more memory and severe limitations etc.

I'm sorry I should have been more specific.
It's the 20inch Intel iMac. Bought it new in February 2008.
Does that help ?

Replacing a Hard Drive in an Intel iMac

Not a very nice job at all. As stated iMacs look nice and glossy but have severe limitations.