The OS needs to have it's own drive. It should not share anything with the database drives.
The database should be on RAID 5. If you aren't going to have to high of a load on the system then the transaction logs can probaly go on the RAID 5 array as well. Ideally I like to put my logs on a RAID 0+1 array for additional speed, but I'm usually dealing with massive systems for those. For smaller and medium sized systems I usually just leave the logs on the RAID 5.
Haven't seen to much of a performance hit with that sharing.
The reason that you never put anything on the same drive as the OS is that the OS drive will have your swap file which will be contentally accessing the drive. Also if your database files are on the os drive, and the database fills the drive, now your OS doesn't have the drive space it needs to run, and you now have a major problem.
If your system will have enough load that you need a seperate array for the log drive, then get the externial cage. Any reason that you don't want the externial cage? Most cages are hot swappable, while internal drives are not.
Denny
--Anything is possible. All it takes is a little research. (Me)