instead of doing a mysqldump can I just backup the physical files in /var/lib/mysql ? if it crashes, I just copy and replace the folder?
This is possible but you need to have access to your server and it is a drag to do manual copy and paste with the permission issues and stuff like that, I suggest you download mysqlyog (search google) and this is free, this can download your mysql even if it is more than 500mb, and you can also restore your database with a dump more than 500mb (I used to own a forum with about 800mb sql data and it did upload it without a problem)
You can copy the files but only for MyISAM tables. But chances are there you run into permissions problem if you don't have much experience with Linux.