First things first. There is no copy software yet announced that will do the same thing with DVD PS2 as CloneCD and CDR-WIN do for CD PS2. So we can't yet use DVD-RAM to make working backups. We await NEO4 and what's been posted for it in respect of DVD copies.

The DVD drive is a good investment for ripping DVDs onto CD - although the process is time consuming and you might as well buy the damn game!

As to your modchip/key question. Having a professionally installed modchip pays dividends because the wires reach parts that the USB port can't; so it does the job better. At the moment, you can only backup CD games.