External. Because the system drive is often 5200 PRM...which is too slow. And one thing that it constantly does, because it houses the OS, is constantly accesses system resources. This will cause video playback to be interrupted, and you will get dropped frames.
Up to you if you want to do it. Those are the reasons not too.
Oh, and if the drive dies, and the project and media are lost...well..hosed.
Shane
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