You want your TM external to be? Thanks.
Like you, I don't have a large amount of stuff on my drive (even now it's only 200GB on a 320GB drive) and I have two backup drives - SuperDuper on a 500GB drive and Time Machine on a 320 GB drive.
For the Time Machine drive, it's a reflection of how I use it. In my case, Time Machine is most useful when I'm working on a large project and want to go back to the version of a document from a few hours or days ago. However, once a project is completed and I have my final version, I don't want every " slightly different" copy of a given document.
I'm sure that someday the Time Machine will start dropping the oldest backups in order to make room for new ones, but I don't lose too much sleep over that as everything I want to keep permanently is on my Super Duper backup.