that your computer cannot find a valid System folder from which to boot.
I note that the "Apple man" has covered all the possibilities without coming up with an answer.
To answer your questions:
2. Not automatically, it will offer you a choice of installation locations and it is up to you to choose the external HD
3. No, except to say, when you have the OS installed on the external HD and the machine is running again, you need to get all your data, pictures/music/document/etc., off the hard drive if possible.
Or you could just use your backups to replace your data onto the external drive
I get the gray screen with folder and question mark on boot up.
I am told by apple man I need to either
remove some data from HD or use an external HD.
or Replace HD.
1. Will external HD work without any OS installed on it?
2. Will OS disc automatically install to external HD?
3. Any other/better suggestions please