AHT does not necessarily mean that a test with no error reported is a clean bill of health.
If you have a system drive that is corrupted directory it WILL or can block booting - from any device, even from DVDs.
External is fine, turn it on after boot. Turn it on after Disk Warrior is running.
And my lecture point: always have bootable backup clones and even if it was owrking it was old slow and out of warranty and your new WD Black 1TB is much faster. But then buy a data drive, one for backup too.
You should never need to reinstall an OS other than when a new OS to start clean (and use Setup Assist to import your old apps).
So play with just the new drive and leave the other to rest.
Do NOT copy data or recvover to your good drive.
Need a recovery drive for that.
you don't need to use a sparse disk image.
Most people try Data Rescue 3 demo to see if it will read and chance to recovery before buying $99.
Use Carbon Copy Cloner to make copies of your drives and be able to boot from.