Ahem. Believe it or not, when I was very poor and couldn't afford computer equipment I used to run '95 partially on an internal 170mb HD and on an external SCSI ZIP drive. Wasn't the worst thing in the world. Took quite a bit of hacking to do.
Anyway, to answer your question, the easiest way to do what you're trying to do is this:
Remove the drive from the case, install it locally on the IDE bus inthe system, install Win2k.
Copy your boot.ini onto a boot floppy with a set of "minimal" firewire drivers, redirect your boot.ini path to whatever the RDISK volume for your now externalized firewire drive is.
Should work.
