Error Message 'You may not install to this volume because the computer is missing a firmware partition'

Later versions of macOS require a working & properly formatted internal drive when installing macOS to any drive (even an external drive)....the internal drive can be empty though, but it must be properly formatted using Disk Utility so it has a hidden EFI (aka ESP) partition and a standard partition with HFS+ or APFS (depending on the OS being installed).

Is your external drive properly formatted using Disk Utility? Some third party external drives ship with odd partition layouts & file systems....sometimes with hidden things as well. Here is an Apple article on how to erase the whole physical drive which will make sure to create a brand new partition table including the hidden EFI/ESP partition. If your external drive does not have this hidden partition, then that may be the problem.

Erase and reformat a storage device in Disk Utility on Mac - Apple Support

Just curious on the exact model of your iMac? You can get this information by clicking the Apple menu and select "About This Mac". And what is the BootROM version (this can be found in the Apple System Profiler.....Option-click the Apple menu & select the first item). If the system firmware is not up to date, then the later macOS installers will want to try to update the system firmware.....that process definitely requires a working & properly partitioned & formatted internal drive....with macOS Monterey installer, that internal drive must be an Apple OEM drive).