If I store movies on an external hard drive which connects to the computer via USB 2.0 cable, will I be able to watch the movies on my computer, or will the USB connection be too slow (or maybe it doesn't matter, b/c the movie loads to RAM first)?
What about to a TV?
Is there a better setup you recommend, such as buying a network drive?
The data rate to watch movies is actually very low, no more than about 5 to 6MByte/sec even for HD movies. USB 2.0 is plenty fast enough for that as long as the disk isn't busy doing something else at the same time.
Yes, you can play movies from an external drive without issues.
If you would like to connect your computer to a TV, this can be done easily but depends on your setup (type of TV, connections and whether you have a desktop, laptop and what type of video card you have). Typically you can simply buy a cable that goes from your computers DVI connection to you TV's HDMI connection. Some computers even have video cards with HDMI out which means you would just need a typical HDMI cable.