Is it possible to use External HD as main boot drive? (Help!)

Hi all
I am about to buy a Seagate FreeAgent Pro (link: http://www.bhphotovideo.com/c/product/478636-REG/SeagateST305004FPA1E3_RK_FreeAgent_Pro_500GB_eSATA.html) with 500Gb and FW400/USB2.0/eSATA. I have a Mac Mini, and its internal HD is too small for me (80Gb total for about 70Gb of data).
What I'd like to do is install OS X on the External HD and use it as my main boot drive, and perhaps the Mini's internal HD for data backup. Would that be possible/legal (I only have the install discs that came with it - my first Mac :D)? If it is complicated, could you guys explain me how to do it?
I'd also like to know whether the performance would be better or worse. The Mini's got a 5400 RPM drive, and the external is 7200 RPM and would be connected through FW400 (plus a lot of free space for now).
One last question: if it is indeed possible/legal to use the External HD as my main boot drive, would it be possible to install and boot Windows on the external HD using Boot Camp or Parallels?
Cheers
Daniel
Mac Mini 1.83 GHz Core Duo 1 GB Ram 80 GB HDD Mac OS X (10.4.9)

Performance will be worse because FW400 is considerably slower than the internal bus. For startup I would continue using the internal drive. You can use the external drive for data storage as well as off-loading any music, picture, and movie files to free up space on the internal drive. You can also partition a chunk of the external drive (80 GBs) to use as a backup partition for the internal hard drive. You can clone your internal drive to the external (partition) which will give you a bootable backup. Here's how:
How to Clone Using Restore Option of Disk Utility
1. Open Disk Utility from the Utilities folder.
2. Select the backup or destination volume from the left side list.
3. Click on the Erase tab in the DU main window. Set the format type to Mac OS Extended (journaled, if available) and click on the Erase button. This step can be skipped if the destination has already been freshly erased.
4. Click on the Restore tab in the DU main window.
5. Select the backup or destination volume from the left side list and drag it to the Destination entry field.
6. Select the startup or source volume from the left side list and drag it to the Source entry field.
7. Double-check you got it right, then click on the Restore button.
8. Select the destination drive on the Desktop and press COMMAND-I to open the Get Info window. At the bottom in the Ownership and Permissions section be sure the box labeled "Ignore Permissions on this Volume" is unchecked. Verify the settings for Ownership and Permissions as follows: Owner=system with read/write; Group=admin with read/write; Other with read-only. If they are not correct then reset them.

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