Yes, you can have this on the external hard drive. Just adjust the paths accordingly in my previous thread.
yes, you will have to upload from both Dreamweaver Sites.
For the existing site, set the Host directory on the Remote Info tab of the site definition to:
For the power store site, set it to:
this will put the site back together when it is uploaded to the server.
The error message you are getting is saying that there is not a localhost connection created to connect to the power store database. Once you have the power store files in place and edit the Connections/localhost.php file to connect to the powerstore database, you will fix that error.