I'm just a newbie, but I followed an excellent how-to at:
>1) Can I install them on an external drive?
I assume you've downloaded iso files (files with a .iso at the end).
If so, use a simple CD burner program to "burn image" - don't just copy the file to a data CD. Linux is famous for being installable on even a USB memory stick. If your motherboard BIOS will let you boot from a USB-connected device. the answer is Yes.
>2) Which is the best one to install as I am running Windows 7 Ultimate 64 bit?
So your motherboard and chipset support 64-bit, then. I installed the 64-bit version of Ubuntu 9.04, and it worked really fast, but I had trouble getting hold of certain applications I wanted in 64-bit (perticularly Adobe Flash is a pig to install). So when I upgraded to 10.04, I used the 32-bit version. Very little noticeable diference in speed. But if you want to access more than 3GB of RAM, 64-bit is what you need.
>3)With an external drive can I boot into either Windows or Ubuntu on the external drive?
If, towards the end of the install, when the installer asks where to put the boot-loader (grub), you point it at the external drive (and you leave the external drive as your default boot drive in BIOS), you should get (on reboot) a startup screen that lets you pick which system to boot into.
>4) If I transfer the Ubuntu download from the C drive to a dongle or directly onto the external drive.
Simply copying the .iso file will do nothing. It is a CD image file; it needs to be "burnt" to a CD. You then boot up, with the BIOS set to boot from CD before any hard disc.
>5) Will Ubuntu support the drivers needed for my PC and printer?
Hardware detection and driver installation in Linux is almost always done transparently during installation. I, too have a non-standard handbuilt setup. I had to do a search for a Linux driver for the SiS sound chip, but everything else was automatic. I have an AMD64 CPU, and an SiS chipset (mostly). But i could hear sound from the first reboot, I just wanted some special functions on the Sis Sound chip, and could have done most things with the default driver that Linux chose.
I understand Epson printers are particularly well supported.
I wish you luck: don't forget to check the link above (after you've burnt your CDs).