1. Externals are usually used as back ups and to store music that one cannot fit on the internal.

2. The more memory, the better performance.

I prefer to keep my music on the internal as it is less to carry, but an external drive shouldn't cause you any problems and gives you space for a much larger library.

In general SSL is very light on memory usage, and can be run on a laptop with only 128MB RAM. However both OSX and Windows XP like to have at least 512MB RAM to acheive the best perfomance. Beyond that you won't see an improvement unless you are using other memory intensive software, Photoshop, ableton etc.

for me, i love the externals to take with me and for ease of use like that, but i dont like the heat generated by them in the tiny enclosers, for me it's all about the airflow in the enclosers, but other then that externals are great for music you can't fit on your internal.

I also used a external drive, but at the same time im always worrying that one day i might just find my external drive not working and all my music gone.
External drive are great tool for music, but i would not fully relay on them.