When you say "Reinstalled OSX on the external drive and it worked" - does this mean it went through the OS setup (time zone, etc.) and you were able to boot into a working copy of macOS (OSX)? I presume that's what you mean.
If so, then the disk-not-readable would apply to the internal disk. If you were able to successfully install and boot from the OS, then Disk Utility will not erase that disk so it would apply to your internal disk. Unless there is something you want from this disk, you can try to erase it. If the SSD went bad, then it won't be able to erase the disk and format it for "Mac OS Extended (Journaled)" which is the format you should use.
But, before you go any further, does the MBP now have a version of the OS that you want? It either would have installed High Sierra or something earlier than El Capitan based on how you described the Disk Utility app. If not, let us know and we can take steps to get the right OS on there.
Let us know if you can erase the disk or not as that will give an indication of what has failed.
As I posted yesterday I installed high sierra on the internal disk and it seems to be working fine;in fact it seems to be working better than when I was running sierra( There is a problem with Safari on a few sites but I will post that as a separate question). Now the strange thing is I first did a time machine restore to the internal drive and it worked horribly;kept asking for key chain passwords and beach balling terribly. None of that with a fresh install of high sierra.
I'm still wondering what caused the problem of not booting in the first place and the mac not finding any destination drive?
thanks again