Well - it's taken Microsoft decades to impliment yet another Unix feature with symbolic links. 'Nix had this in the 70's - wonder how long it will take them to work out that the Users folder also could be placed elsewhere? Standard question during a 'Nix install. I always put the Home directory in it's own partition and judging by the amount of questions about it on the net it's a popular question with Windows too. Symlinks are probably the best, cleanest and easiest way to do this. It means that any apps that have the Users folder hard-coded still work without modifications, and it saves all the messy registry hacking. Best one I've seen -
I like to keep the OS and user data seperate both in a corporate environment and at home. Corporately an AD user profile or GPO can redirect the My Docs folder to a NAS/SAN or other network share. Simple reeasons - backups are handled by the data centre or systems guys and not end users, and the PC isn't THEIR PC anyway - it's the company's (so is the data, btw) - so if it dies give them another PC to log in to and they carry on as they were within minutes.
At home, I want to put it on a seperate disk/partition. If my OS fails I want the user data unaffected - makes restores quicker and you also end up with a less fragmented disk as user data changes all the time.
BTW - I also use mirrored disks - having a 1TB+ drive at home is great but it's an awful lot of data to loose if it goes pop! AND you end up with a lot of data to back up unless you use incremental - which is a pain in the arse to recover! And yes - I do back up both online and sync user data to an external HDD as well.