Is it possible? It would be to a strictly custom install since the Windows installer especially for 7 will prompt you with a message stating Windows cannot be installed on usb drives like external hard drive of flash drives. Is it actually reliable?
Not really since any boot up with the drive itself plugged can see the boot configuration changed without warning if the drive letter is reassigned. With the ubunu installer being a different OS entirely you can see that distro for instance see a direct install from a live cd to an external HD or flash drive. The usb bus can also see lags at times depending if you like everyone has other devices lined up like keyboards, mice, other addon devices.
The eSata type connection on the other hand is an extension from the board to an external enclosure there still seeing the onboard controllers involved. When first signing up to for testing the 7 betas here I soon found myself running out of internal drive space already having a working dual boot across drives between XP and Vista.
Solution? Remove external drive from usb casing since new storage had been added on just before 7's beta release and install it internally! CarltonBale.com » Western Digital My Book - Opening the Case - Removing the Drive
For WD MyBook Essential models there.
The RCs will see the drive taken over along with the present Vista drive while Vista will end up on the former external drive. The other two are a matched pair by the same make but different model intended for internal use and can be made into an array at some point when eventually upgrading Vista to the finshed 7.