I just purchased a 500gb external HDD for backup purposes. I began to think though, could I just use this as a permanent secondary HDD? I know I probably need 2 HDD's just for performance, reliability and longevity, but would using my external HD be just as effective? It uses USB 2.0 rather than being an internal HD and I'm not sure if it would be as speedy and reliable.
External HDD's are good only for backup purposes where you want to keep your data detached from the PC. But since you have bought it, you can use it as a permanent HDD. Downsides are already mentioned. If possible get an internal HDD.
USB 2.0 is very slow compared to an internally-connected drive. It's OK for bulk storage where performance isn't critical, but don't forget that you DO need to back up your data if it's valuable to you.