Dear James,
I have four B&W G3 running, two on Gentoo, one on FC6, and one on Ubuntu. I took a quick check around and see that they are all running with small (< 80 GB) disks. Some B&W Macs had bad IDE controllers:
http://en.wikipedia.org/wiki/Blue_and_white_Power_Macintosh_G3
and there are some sites out there that help you tell if your machine falls into this category:
http://lowendmac.com/ppc/g3c.shtml
(look for "402" on the controller). I remember trying to install SuSE on a B&W with a large new hard drive and it just about drove me insane. Everything _seemed_ to be going fine, then suddenly just hung up (and various, unpredictable places). I think I always got "time out" errors though.
My suggestion would be to get the ATA controller your leaning toward, but without funds it might be tempting to seek out some old, smaller hard drive for a Linux/Mac boot and use an external Firewire drive for storing larger files/apps.
Just my 2 cents. /Mike