Richard,
Yes, it can be used, but with a signficant loss of Photoshop performance, since neither Firewire nor USB2 offer an interface with the throughput of SATA/IDE/SCSI. I purchased a portable 7200rpm Firewire/USB2 combo drive to use with my latop as a 2nd hard drive and PS scratch disk, and found that even in contrast to using only the single internal drive, the amount of time to complete a task in Photoshop that made use of the scratch disk (sorry, I don’t recall what exactly I did), was double or more. I do not recommend using an external disk drive for a PS scratch disk unless it uses a SATA, IDE, or SCSI connection. I think you’d be better off reserving it for data storage to free up space on your internal drive.
Regards,
Daryl