How to run Boot Camp on External Hard Drive?

I use my mid-2012 11" MacBook Air for gaming and school work. My hard drive is filling up fast, and I was hoping I could use an external hard drive and Boot Camp to run Windows for my games, thus freeing up most of my hard drive.
My questions are:
1) Is this possible?
2) What equipment would I need to do it?
3) What would I be looking for in an external hard drive for this purpose?
4) If I did this, would I be able to unplug and replug my external hard drive without causing a problem?
5) What version of Windows should I use?
The program I will be using for my games is Steam.

For the MacBook Pro Retina and Windows 8.1 the setup procedure was the following:
Step -1: Make sure your Thunderbot drive works, stable and reliable.
Step 0. Make sure you have a complete Time Machine backup of you Mac OS hard drive. Seriously. Very easy to mess things up completely.
Step 1. Get a Windows 8.1 64 bit iso. You might want to try it out first before committing money to it. For that you can download an official 90 day Windows 8.1 Enterprise evaluation from Microsoft. It's somewhat hidden from mainstream experience, but search engines help you there.
It is important to use 64 bit, as 32 bit will not work.
Step 2. Get a USB flash drive. 8 GB USB flash drive worked fine for me.
Step 3. On Window box or from virtualized Windows machine make a bootable setup USB. I have used Rufus for that. Make sure you have selected "GTP partition scheme for UEFI computer" and FAT32.
I've tried MBR partition scheme, but it hasn't worked for me.
Step 4. Once bootable setup USB is created, shutdown everything. Plugin your external thunderbolt drive and bootable setup USB flash drive. Hold ALT (Option key) to choose from what thing to boot.
Step 5. If you are lucky you will see yellow "EFI Boot". Yellow usually meens 'external'. That meens you are going to boot into setup from USB flash drive. Go for it.
Step 6. In 5-10 minutes you should get into Window setup. Whenever you are asked, always choose "Custom" or so, till you get to the hard drive selection screen. You should see list of many partitions coming from 2 drives - one internal and one external.
WARNING: Be super careful here!!!!!
Step 7. Convince Windows to install itself on the drive that is external. You might have to delete all of the partitions of the external drive and leave it completely unpartitioned. This will make Windows autoconvert it's partition scheme to GTP.
WARNING: Think twice before deleting any partitions; do not delete any partitions on your internal drive.
Step 8. Let Windows install itself. I recommend turning off windows autoupdate for now, especially drivers part of it, since Windows 8.1 autoudate seams to be pushing buggy drivers at the moment.
Step 9. If you are SUPER lucky after reboot (and holding ALT/Option) you should see gray "EFI boot" that will boot Windows from external drive.
Step 10. Download and install Apple latest bootcamp drivers, things should work normally once those drivers are installed.
Step 11. Enjoy!

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    MacFormat Issue 236 page 65.
    Sorted!

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