Storing Files In Image Columns In 2005

I did some quick Googling and didn't find the article of my dreams here. Any experience with storing files in the db in 2005? Any opinions?

Here's the deal. We have our new 'Enterprise' software being designed and written in St. Petersburg (not FL) and I'm reviewing the design for dealing with letters and forms that are generated as hard copy from our business (by the thousands per month) and sent to clients for review, signature etc. Then they are returned by fax or snail mail.

The current design has all of these being stored in image data type columns in the database--storing saved files of the actual outgoing stuff and saved files of the stuff that comes in (scanned copies or the files from our fax server).

This screams 'BAD IDEA' based on our experience doing this in SQL Server 2000. We get things like 23 page faxes from Dr's offices, large packets of FMLA forms returned, etc. In 2000 they tended to get rather large when stored in the DB and caused us all kinds of headaches when Microsoft changed how it recognized and displayed certain types of files, e.g. tiffs.

Further, the outgoing stuff is largely boilerplate with added fields from the db--name, address, a few dates. My proposed design for outbound notifications and forms was to keep only references to the template used, the date created, and an id to link it to the personal info of the schmoe to whom it was sent--essentially, store which document template and then just enough data to map to the variable content that is pulled from the db. Then you can recreate the file that was printed and mailed at any time in the future, but you don't actually save the .doc (or Word .xml) anywhere, not in the file system, not in the db.

The current developers feel this is way too much work to design--and it is certainly more effort than just generating .docs/.xml files via a merge with Word and then stuffing those into the database. They also argue that having them in the db makes them 'more secure' and more 'accessible' to users around the globe.

Does anyone know if the image storage is any better in 2005 than 2000? The .docs & .tifs we used to store just about tripled in size when we put them in the db in 2000. Plus there were the defrag issues and generally it was an unsatisfying experience.

Does anyone know what the advantages/disadvantages of generating Word .xml files might be? Can they be stored as xml data type in SQL Server? Perhaps this is a better option?

If anyone has the time to digest this, please send opinions.

Thanks!