I think that you have a perfectly reasonable use-case here.
I've used offline files with XP not Win 7 but found that it was downright dangerous with lost and corrupted files and odd synch issues. So I never recommend it's use.
For my own use, I've used 3rd party tools. Mainly SyncbackSE which, though not free, is very powerful and utterly reliable. With a tool like this, you simply set up a sync between the USB drives folder and the internal drive folder. The tool monitors for changes and automatically syncs them. Syncback can also maintain multiple versions automatically so it does far more than offline files. Syncback is also able to monitor for the presence of a specific drive and run a job when it appears.
There are plenty of other similar tools that do similar jobs. The only disadvantage is that you have to set up a sync profile every time you change projects. However, it isn't a big job and you can usually clone the previous job and change the folder names.
If you are happy to do the sync manually, the other method I've used in the past is to use a distributed source control package. Namely Mercurial. Mercurial is better integrated with Windows than GIT and handles large binary files rather better. However, with this method you need to remember to commit the changes at which point, assuming that you've got things set up correctly, the changes can also be automatically synced to the external drive.
I would like to propose a possible alternative though.
You should certainly also have a proper backup tool that takes secured copies of all data files to a different location where you cannot accidentally delete them. Syncback can do this job as well though personally, I use CrashPlan with both local and cloud storage. In this case, you don't really need a copy of the project files.
So I actually recommend using something like Crashplan to take care of the secure backups and keep the project archive on the external drive with a soft link in your "My Documents" folder (or wherever convenient). Many people forget that Windows' HTFS format supports links and junctions. I use Link Shell Extension to assist setting them up. This is the setup I use on my laptop where I have a number of archive folders pushed out to the external drive and links to those folders in My Documents and other convenient places.