tiger is getting older and more outdated. Mackintosh is preparing to release the final of the OSX in the spring/summer months. I would personally do one of two things, get a new hard drive that gives you more storage than you will ever need and use it as a ftp server to free up your main computer. or get a decent drive and install a ppc linux distro on it. having linux on it would make the computer faster and last longer.
as for using an external hard drive, the bootdrive would need to be configured i am unsure of how to do this i know that booting from a cd would be apple (command) C and that booting into the kernal with no GUI is apple (command) S.
unless you are absolutley sure that the harddrive is dead beyond fixing try to boot while pressing the apple S, and try to run through the filesystem. i recently had a problem with my tiger tower that appeared to be caused by harddrive failure. in the end a clean re-install of the OS fixed all the problems
