An internal HDD is faster, but if that is the same HDD, that houses the OS, then an external Firewire HDD is better.
When one uses the exact same HDD for he OS one runs and for the video footage one edits, then the OS has to fight for access time, as playing back video will access the video too.
If one edits a small movie and does not have lots of footage and can live with the extra slow down, then one can store video one edits on the same HDD of course, but if you are a bit more serious about this, an extra HDD (internal or external) is much better.