I'm just wondering if I can use an internal reader or not
Every device which identifies itself as massstorage can be used with Poseidon. I didn't yet hear of any external HDD, card reader, thumb drive etc. which didn't work with Poseidon. Some digital cameras don't work because they don't mount as massstorage. But most of them do work.
and make it a bootable drive
You cannot boot from USB drives unless the drivers are in a flash ROM or something. But if your Amiga has a flash ROM, it also has Zorro slots and in this case you shouldn't use a Subway but rather a Highway or an Algor USB card.
However, you could first boot from your internal HDD, make the drivers resident and then reboot from your USB drive.
Bye,
Thomas