Thanks for the update Eric.
To expand on the issue, let me ask this.
Should I be creating bootable external drive with two partitions. One for Mac OS X and the other for 3rd paety software,
Or should I only have one parttion since the drive is intended to be bootable.
In addition what size external drive is appropirate.
Thanks and I look forward to your reply.
You will probably want something at least 32 gig. Personally,
I have a high speed SD card with a base install and all the diagnostic
and repair goodies on it.
Creating is simple, create single partition (make sure in options you set
GUID scheme otherwise it won't boot). Installing OSX can either be done
via the App Store installer or you can boot to the Recovery HD and install
OSX that way. Going the Recovery HD route does not install all the iLife
stuff, iPhoto etc., so will use less space. You can then boot the newly
created volume and install your repair tools.