Security update and also update to Monterey problem

I would make sure to also have a good backup on a dedicated backup drive as well.

If this iMac has an internal hard drive (including a Fusion Drive setup), then I would be concerned about the health of the hard drive for a Mac this old. An OS install/upgrade can be very stressful to an old hard drive that may already have issues that you may not have noticed yet. Plus things can go wrong in other ways.

AFAIK, Migration Assistant will only allow migrating to the same or newer OS. You always need to be careful when moving data to an older OS since some documents may not be compatible with older versions of apps (especially preference files).

Yes, if the external drive had a GUID partition, then it would have avoided the problem. As you have found out sometimes it is technically possible to boot macOS from an improperly partitioned drive. Or maybe something happened to the partition table and it only sees the MBR partition information which macOS also includes within the GUID partition table. You could try running Disk Utility First Aid on the whole physical drive to see if anything shows up. Within Disk Utility you may need to click "View" and select "Show All Devices" before the physical drive appears on the left pane of Disk Utility. For an external drive the physical drive may be identified by the Make & Model of the external drive or possibly by the USB chipset used in the drive enclosure/adapter/hub.

The error message in the picture seems pretty self explanatory. The external drive is not using the correct partition scheme required by macOS. The only way to fix the problem is by erasing the whole external drive so it has a GUID Partition scheme and the appropriate file system (APFS for macOS 10.14+). Of course erasing the drive destroys all data on that drive.

To transfer items depends on the current setup of the internal drive and exactly what you hope to accomplish. You can use Migration Assistant if you want to transfer an entire macOS user account, but this will either replace the current user account on the destination or it will create another macOS user account. If you don't want either of these outcomes, then you can manually transfer the files from the source to the destination using the Finder, or even using a third party app like Carbon Copy Cloner (CCC). CCC may be needed if the macOS user accounts on each drive use different userIDs (do NOT change the userIDs) as it will ask for admin privileges to access areas outside of your own user account.