1. Any internal drive would be faster than an externally connected HD via USB 2.0(regardless of SSD or HD).
2. External drives should be for data storage only due to the relatively slow speed of USB 2.0 and the fact they can be fairly easily corrupted by drops/liquids/etc (at some point we all forget about them being in our bags and do something stupid with our bag... i.e. get angry and throw it!).
There is no reason why you shouldn't if you have space.
The reason people say get an external HDD is because sometimes 64 GB/128 GB just isnt enough for most people, so they use an external HDD. If you have enough space, use the SSD for sure. The speed difference is in a world of its own.
Note that this is the compressed size. I checked my "Developer" folder on my hard drive (ie, where XCode 4 and all the includes files and whatnot installs), and it's 7Gb - and I'm quite sure I don't have much "clutter" in there at all, it's pretty much a fresh install.