Pretty much, you'd have to build things like USB/Firewire into your new kernel and ensure your existing distro had support for it (USB or Firewire depending on how it connects, or whatever other way it might

).
Other than though, I don't see a problem until it comes to booting, but I'd think you could accomplish booting from a boot loader on an internal HD that'd then point to the root filesystem on the external drive and all would be well from there
Cool