May we ask why you want to? We may be able to offer a solution that doesn't require doing an installation to an external driver.
christop is not quite correct. If the external drive is eSATA, you could install Win7 to it. Win7 just doesn't want to install to USB devices. I can think of a couple of ways to get Win7 to boot from a USB device, but I wouldn't want to. Although USB 3.0 is pretty much fast enough.