As LOTR says, if you've already followed Murasame's advice with the clean install on the default volume, then you already know the external drive is not the factor. Still, it would be good to keep it out of the situation until you've nailed this problem.

Freeing up space on the boot drive is a good idea (btw--a 10 minute shutdown should clear all the Virtual Memory and also free up space).

Panther is good--but sounds like overkill for your problem. Free up some disk space, then create a new user with admin privileges first, and install LW (reg or beta) in that account before you try drastic measures like system reinstalls/major upgrades.

cheers