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If you are using a SSD, i highly recommend using two drives. Designate one drive for the OS (64 Gig should be plenty) and use a secondary drive for storage and whatnot. Whether it's internal or external it makes no difference, mind you, depending on what type of USB you have, you will probably get faster speeds internally.
If you are using a laptop you are handcuffed with the hardware expansion, to an extent.
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