If you can install a drive, you can put together an external one.
DVD-burning is one thing, reading is another. For some reason, you can't watch a video DVD through FW. I don't know if that's changed now. Haven't burned with an external DVD drive, but I would assume if you can encode the video, you can burn it. Unless you're just doing data or audio, in which case it should work just like CD burning. Just slower.
iDVD doesn't work with external drives though.