To be honest, I still use CDs. Not that often, but I still use them. I use them mostly to store songs so I can listen to them anywhere I want to, not just the computer room. I hardly consider CDs to be "obselete". I keep seeing a ton of them in stores.
Now, if I could choose between 800 CDs and one external harddrive, I'd go for the 800 CDs. While an external harddrive would be nice, it is still just one machine. If I were to store all my stuff on that one harddrive, then, what would happen if I were to lose the drive? I would not only lose files I don't want, but many, if not all, the files I do want. But if I have my stuff stored on CDs, if I lose a few CDs, then I'd be only missing a couple files I still want.
Another reason I'd choose CDs over harddrive is mobility. CDs are just so much easier to carry around than an external harddrive, in my opinion.
But that's just my view. My family and I have been using CDs for years and I doubt we'll stop doing it for quite some time.