Hi James,
Before you read any of this, please take into account that I am a complete fool/newbie and I’m really just looking for confirmation that what I’m doing is correct and won’t destroy my system.
Welcome to the club. 
I had similar problems when I started all this about 3 weeks ago. I set up a dual boot system with Vista and SuSE on separate HDs. I found it very hard to get to the bottom of how SuSE installs itslef and how grub works and so on. There is a huge amount of info on this topic but not so much simple guidance around. And it is really simple, actually.
If you are able, I would recommend you burn the SuSE iso to a DVD. Then physically disconnect the Windows HD to protect it from installer configuration mistakes. Then boot off DVD and install on the external HD. I have not installed to an EHD myself but I am sure SuSE can do it. Then you can initially use the bios boot menu to choose between Windows and SuSE. After you have educate yourself about grub you can modify the grub menu on your SuSE EHD to offer you the Windows boot option. This is not difficult once you know how.
Prudent advice I now give folks who have SuSE on a spearate HD from Windows is never to install grub on the Windows HD. Windows does not respect it and it will be overwritten if you reinstal Windows or upgrade it and the grub will actually cause Vista SP1 install to crash. I have no idea what Windows 7 will make of it.
Let me know if this method is feasible for you.
1.) Will using a disc image in such a fashion to install OpenSUSE actually work?
Not sure.
2.) Will the installer (pre-boot) at some point before it installs the OS, allow me to select which drive/partition to install the OS onto? If so - where is this?
Yes. It asks a couple of times before you press the “destruct” button. It is not so clear how to choose where it puts the grub (you may see a “automatic config” option - deselect it). SuSE appears to me to default to putting the grub at hd0 which is going to be the Windows HD in your case.
3.) If I mess up and install it to a drive which has data on, will that mess everything up/erase it?
Assume all will be destroyed, unless you are aware of how to make SuSE shrink any existing partition and squeeze itslef in the gap.
4.) If the installer detects another OS or files, will it prompt me to make a decision on what I don’t to do, or will it expect me to know there are files/another OS there and punish my ignorance by erasing all my stuff?
It is pretty good at showing you what partitions exist on what drives and telling you what it proposes to do and giving you the chance to modify its proposal or abort before it does anything.
5.) What drivers, if any, will I need? I hear Linux has all driver pre-compiled, but not for my (ATI) graphics card.
I don’t know. One advantage of the full install iso is that more drivers are included. I found on my machine that I couldn’t install or boot the live CD because of video card issues, but the full network install was cool with it. Took a long time, though!
6.) What advantages does the full 4GB (ish) install have over the Live-CD? It doesn’t matter anyway, I really want the full OS installed on that external, I’m just asking a question because I’m curious.
I am having this discussion in another thread. It still isn’t clear to me what the differences are between different installation routes. You get different options too. Eg: the live CD install doesn’t offer KDE3.5 but the DVD install does. I am sure there are many other differences but I have no idea where one finds out what they are.
7.) As a newbie, is there anything else important I’ll need to think about other than the obvious (such as compatibility with software, obviously I know windows apps won’t run on Linux without an emulator like WINE).
Yes. Excellent question. My 2 cents:
a) Avoid installing grub on your windows HD (as said above).
b) You will probably want to access your Windows filesystem from within SuSE; This is tricky due to a security policy thing (see: Sharing mail between Windows and SUSE - openSUSE Forums)
c) Some open applications are buggy. Most I have tried are really, really good and better than my Windows apps, but some can cause problems. In my case I had trouble with openJava and Iced Tea crashing Firefox when I invoked stock market charts from my brokerage website. It took an age to figure out what was wrong - turns out I needed the bona fide Sun Java RE and browser pluggin rather than the open-source version. Expect a few things like this. Expect it to take some time to find the solutions.
d) I couldn’t get encryption of my filesystem to work using the install partitioning process.
e) IMO Linux’s big advantage, other than retail price, is that it gives you back power over your PC. Microsoft OS shackles you and is parochial. With Linux it is like being a kid in a sweet shop. The downside with Linux is that it comes half build and configuring it, at least figuring out what needs to be configured and how, is no quick task. You will end up using terminal commands a lot and this is a unix learning curve. This is a fun but time-consuming OS. With Windows it is generally easy config. and good instructions. The learning culture here appears to be forum-based.
8.) Any fundamental problems with dual booting OpenSUSE and XP?
See above.
- Other than that, I’d also like to mention one of my two partitions on my windows based internal hard drive has a ‘false’ windows XP install upon it. It appears at boot, and if you attempt to load it, obviously it fails because that windows installation has been erased and does not exist. How can I get it to NOT appear in my pre-boot, OS selection menu? Sorry, that’s a windows question I know >_>;
You need to boot off your XP disk and run a repair. I think XP asks you to log in to the installed OS and you then get a command line prompt. Here you enter the correct commands to fix the boot (you’ll have to Google them). In Vista it involves the “bootrec.exe” command (I know because grub screwed up my Vista install and I had to reset the master boot record or MBR).
Thank you all for any help you may provide, and my fullest apologies if I have neglected the stickies!
I was told off for this myself. But you have my sympathy because when faced with a plethora of info it is really hard to know what you don’t know and when you are going down a blind alley and when you aren’t. I’m trying to build support for a newbie-ex-Windows install guide that leads a person through some of the minefield.
It is a very exciting OS compared to XP so keep at it, and keep asking questions.
Brian