Transaction Log Size And SAN Utilitzation

DB data file size: 200GB
giant table A: 100GB

Sometimes we've had to do ALTER TABLE statements on giant table A such as converting from int to float that ballooned to using 200+ GB of transaction log to make a copy of the table with the new field type, copy the data in, rename and delete all in a transaction. So we ended up with a 250 GB log file that sits around being 98% empty most of the time as we do log file backups every 3 hours. This seems like a waste of SAN space, however there are times when we do need to do a conversion and we need the space available so it stays. Using a local hard drive for extra log space I would think would severely slow down the conversion. So how do most people handle this. Perhaps have a temp drive tray plugged in just for conversions shared by the data center? Any other suggestions?

I'm thinking we really only need the log file to be big enough to do all the index maintenance day to day and only grow it large when we know downtime and a conversion will be going on. Growing a log file to 250GB is time consuming in itself. No instant initialization of log files in SQL 2005.