file system is more efficient at storing files, but it makes backups a little more difficult, and keeping items secure (ie, you can browse to the folder) is sometimes an issue.
That said, i use the file system, and would never consider the databaste for images, ever, under any circumstances.
you can make the folder where ever you want. I use "/uploads/" on most my sites.
to back up, yes, just FTP in, and download... or, get a server with a NAS option backup, and SSH in and set your backup task to point to the nas /sda6 or whatever it may be.
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