Ooof, it has been a long time but yes I did this with my O2. In my case, I had it booting off an internal drive. From that drive I partitioned & formatted the external drive and figured out the device ID stuff. The next step was to go into the prom and change the boot disk + partition. I think the syntax is something like (scsi_id >> partition_id >> lun_id) . Once you've done that and rebooted again I think the Irix installation disks should point themselves to the right place. That lets you install a new Irix environment on the external disk, which will be the new boot default. That or you have to enter the ID in the installer . So it really took a while.
For references, it was a lot of manpage use and some articles, ?maybe on Higher Intellect? about the settings. I can nab the prom settings from my O2, but am not sure about the rest.