£345 is actually a good price. The last quote I heard for this job was £700+
I don't know if an online backup solution is more reliable or how cost effective it is. I'm sure they will have a disclaimer in the small print declining all responsibility if they lose everything or go out of business. I've suffered multiple failures and losses over the years before I built up a collection of photos and got my act together and my preference is still multiple hard drives - internal and external, and dvds. I think I'm secure now, and any loss will be down to my own inaction in not backing up in the first place.
As for hard drive reliability, I used to think Western and Seagate were the best but not any more. I've bought three of these MyBooks. One was dead within minutes of using it, and a second lasted a few weeks. I've had two (maybe three) Seagates fail within two to three years in the past two years. IBM weren't so good years ago and I stopped buying them. They are now Hitachi.
I've had two Freecom mobile external drives fail. One of these was on a holiday trip with 3/4 of the holiday on it. But it was a backup to another drive, so again expecting the worst paid off.
But the drives I heartily recommend that nobody buys are Maxtor. Over the past 10 years I have bought 15 of these (none recently though). Every single one has failed in under four years. Three out of these were doa. They used to offer a five year warranty, then for some reason dropped it down to one. I wonder why. A company who sell bigger hard drive upgrades and services for Tivos (hard drive television recorders) specifically state don't use Maxtor as they aren't reliable.
I hope you get your pictures back. I think you stand a better than 65% chance as it's probably just the heads not working rather than the discs damaged.