I am using the old ssd drive from my macbook as an external drive. How do I delete system files and library files safely to free-up space?

If you still need files from the old SSD, then I would suggest transferring those files from the old drive, then use Disk Utility to erase the external SSD.

Otherwise you should be able to erase everything from the old SSD except for the "Users" folder, but you may still leave behind hidden items. All of your personal files should be located within the "Users" folder unless you stored them elsewhere. I think it is much better to go with the first option as it will leave you with a clean drive.