Did the external harddrive itself is bad or is it the case is bad? Is this an ide or sata? Personally I probably would do it this way; harddrives are so inexpensive now, I would just go and buy another one (lot less problem).
My system has 1 IDE port which is taken up by the boot hard drive and the DVD drive. I have a second hard drive which is also IDE but is connected to the 1st SATA port using a SATA->IDE converter.
So far, I have had no problems using this system, however recently, my much larger USB external hard drive failed. In looking for a replacement, I was wondering if there would be any problems if I were to use an internal SATA drive for storage as well as the other two drives. I can't think of any reason why it wouldn't work, but I thought I'd just check before spending the cash!
Cheers

Chowhound
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