Chippy - I'm posting as I'm having trouble getting my external drive to work at the moment - but I can answer your question.
You can put what you like on any hard drive BUT be careful. Many software installations will look in default locations (normally on C:) when you install upgrades or whatever. So putting the software in strange places (even a second hard drive mounted in your computer as D: or whatever) can cause problems. Also registry entries are set up in installation, so if your external drive isn't there when Windows is accessing the registry (or worse, you are swapping external drives) then errors will be detected.
Yes you can do it. My advice is to keep your applications in the default locations and place your data and temporary files on other drives. For example, my external drive (when I can get it to play ball) will be used solely for the safe storage of image files.