I've been home (Mumbai) this weekend and have been hacking away for the last two days to get Arch running on my external HDD, since I can't stand Mandriva anymore. The cool thing about Arch and Pacman is their flexibility. Following this guide I was able to install Arch from within my internal hdd arch, and have all the latest packages (including KDE 4.1).
There was only one problem which wasn't mentioned. External HDDs require usb support in the initrd which is not done in Arch by default. So before rebooting just edit /etc/mkinitcpio.conf and add "usb" to the line HOOKS="base udev …". Then remake the initrd using "mkinitcpio -g /boot/kernel26.img".
I must say I'm pretty impressed with KDE 4.1. There are still a few rough edges like the khotkeys keyboard shortcuts not working and some KWin effects not exactly doing anything. But overall a great effort.