The question I'm asking is kind of general, and I'll give more specifics about my specific setup. Here's the main question though: Do virtual machines generally perform better on the host HDD or is it better to operate them from an external disk?

My specific setup: A Macbook Pro with a nearly full internal SATA drive that spins at 7200. On this system I'm running large programs like Photoshop and some other RAM-intense applications. I've dedicated 2 of my 8 gigs of RAM to my VMware Fusion virtual machine, which runs Windows 7 and Visual Studio, sits on the same drive. When that thing boots up, my system really starts crawling. I have an external USB (specifics of that drive are here) which I'm thinking about moving the VM to.

Obviously a USB drive is slower than my internal HDD, but maybe having two operating systems using the same disk is WORSE than putting one of them on a separate (albiet slower) disk.

This a bad idea?