I eventually did copy the Project to my internal hard drive.
I can edit it there, but it is still looking for the related Event file on the external hard drive. Due to a much more insane iMovie '11 bug (that I won't go into, but has been discussed all over the Internets and in Apple support forum, is basically just a big ol' bug and Apple will not address it directly), I'm trying to now link the Project (on my internal hard drive) to the Event which I've copied onto my internal hard drive. It still wants to get the Event from the external hard drive.
To figure out that part, I've started a new discussion: https://discussions.apple.com/message/23899115#23899115 , "
i'm keeping open this discussion that you're reading now,
Cannot open previously saved projects from external hard drive - iMovie 11,in case there is more advice for this issue, and/or other people have the same problem.