If your iMac has a firewire800 port, that is the one to use (rather than the firewire400 port).
Granted, you can boot and run this way, but it won't boot up as quickly as if the SSD were installed inside.
BUT -- once up-and-running, it should run very well.
It's up to you whether you wish to try to install the SSD internally -- could be a technically complex job that is not without danger of damaging connections, etc.
You can pay to have someone do this, but again, if you just want to get a year or two more use from the iMac, booting and running via an SSD over firewire800 will "keep you going" nicely.
Something to consider:
You might want to get an external enclosure that has BOTH firewire800 AND USB3 ports. They run about $65, but the advantage is that when you do replace the iMac, you can now continue to use the SSD in the case connected via USB3 -- considerably faster.
Here's one enclosure that looks like it would do the job:
http://www.amazon.com/MiniPro-FireW...&keywords=oyen+2.5+firewire800+usb3+enclosure
(can be had in either silver or black)