I've used this method for ages now. Works a treat but be aware that, when the external spins down (as they tend to do when not in use), it will take a while (5-10 seconds) to spin back up when you want to listen to your music. Well, that's how it is on my 1TB Seagate drive (7200 rps, 32MB cache ->FW800).
Unless there is a way to keep the external constantly spinning.....