Post edited 03:09 – Nov 20th 2010 by Rebel
I disagree about disconnects if the drive is located somewhere stable and not moved much / at all (I don't have problems with my big drive I move from time to time although my external laptop drive cable is starting to be a little flaky however that gets travels with me in my bag every day and plugged in and unplugged hundreds of times) , but an external drive is not somewhere you want to be putting games / apps, check your laptop ports as you might have an ESATA port (ESATA drives these days are only a couple of quid more then USB) as previously mentioned USB2 has a max theoretical throughput just a little bit less than 1/6th that of ESATA (SATA2)
It's also worth noting that windows has extra latency involved and less data reliability (as in data copy integrity checking not drive failure) on USB as windows can't interface with the drive directly.
Anyhow: If you have a lot of media I would put that on the external freeing up room for steam on your internal one (and allows you to make a COPY of you work files)
But in answer to your questions.
A) Won't lag you IN game but you will be the last in at map changes and steam will take an age to start up. (assuming USB)
B) No, shut steam down, move EVERYTHING to your desired location then redownload the steam installer from steampowered.com and then reinstall telling it to install to the location you have coppied all your files to.
Once installed you will start steam and it will auto update the client to the latest build and restart, from then it will check and populate itself from the cache files you already have. (ie what you moved in the first place)
It doesn't really matter anyhow, you can wipe steam off entirely and it will just reinstall all your games as they are tired into your account not what's on your PC (great if you do run out of space as you can just wipe unused games and re-download later) the only problems are that is 1) you lose any custom maps / skins / data that are not in the core repos
2) you lose any saves if you didn't copy them off before wiping (this is most annoying part if you suffer drive failure)
3) you have to download everything again, unless you LAN this can take….. quite some time if your steam account is like mine
(even on my 20mb pipe it would take ages)
On that note if you own the game you can copy the repos from someone else's steam account at a LAN and it will work fine and you can use steams own compressed backup file utility.
Personally if you can afford it I would recommend getting a larger drive or even a hybrid although they are expensive against the drive sizes, you can get some pretty huge external storage for the cost of decent size hybrid (full SSD is still mega expensive)