by fsmithred » Tue Jan 07, 2014 7:37 pm
A usb thumb drive IS an external usb drive. It's just smaller and solid state instead of spinning disks.
On a live-cd or usb, the operating system's filesystem is stored inside a file named filesystem.squashfs. When you run the live system, it gets unpacked from that file. You can't change what's inside that file - the system is read-only. If you set up full persistence, you can edit system files or install software, but none of those changes get applied to what's in filesystem.squashfs. Instead, the edited or added files are stored on the persistent partition (or loopback file), and the operating system knows to use those files instead of the originals from the CD image. If you install a lot of extra software, you could fill up your persistent volume.
So there may be some advantage to using a live system. If you get rooted, or if you screw up your configurations, you can always boot into the original system that came from the live-cd, and you could even wipe the persistent files and start over (from the point of having a read-only system on the media.) You need to use fat32 for the first partition if you're running a live system and using syslinux boot loader. Other partitions don't have to be ext2, but we recommend that for thumb drives because there will be more space and fewer writes to the drive with a non-journaled file system. In theory, it should last longer that way. (I've never heard of anyone counting how many times they could write to a stick before killing it, but I suspect it's fewer times than the manufacturer claims.)
A four year old machine should have a way to select the boot device. It might be F8 (Dell), F12 (I forget - maybe HP) or Esc (my Foxcon motherboard) or some other key. Failing that, you could probably go into the bios and mess with the boot devices and boot order, but that can sometimes get ugly with multiple drives. I've got four internal drives, and I've screwed up the order several times and couldn't boot correctly until I straightened it out.
And about "the three options". There are more options. You can read about them in the debian-live manual (or maybe it's called the live-build manual) and maybe in man live-boot. Do that when you're ready to experience information overload.