You can also "clone" your internal boot drive to the external drive, making a perfectly bootable, perfect copy of the drive, using Carbon Copy Cloner or SuperDuper -- both found with a simple search at versiontracker.com.
You can't simply copy folders over like you could in OS 9 -- due to the Unix permissions, you need root privileges plus you need to set certain privileges for certain files. Both aforementioned programs do this automatically.