Boot iMac from external SSD, what happens to internal Hard Drive?

if you want to use an external as a startup disk, then I would proceed as follows:

plug in your new SSD

Launch Disk Utility and format the drive as Mac OS Extended and GUID partition scheme

Download either CarbonCopyCloner or SuperDuper - both are cloning apps

Clone your internal drive (your entire system) to the newly formatted SSD

Choose your SSD as the booting disk in System Preferences > Startup Disk

You now have an exact copy of your current system on the external and can simply work as usual

If you wish, you can then use the internal as a backup drive and clone your external system to the internal to keep both up to date.

From your report, you not only have a snail speed 5400 rpm internal drive, but also only 8 GB RAM which may slow things down depending on which apps you use; I'd suggest you keep a watch on RAM usage and do not run resource hogs like Chrome. Also be conservative on background processes such as continuous updating, uploading, or sharing (which is a security risk) - only run those when you are not doing much else. And, beware of Zoom - personally, I would never allow that on any of my Macs until they have greatly improved their security and rid of the hacking which was made possible by their lack of safety features.