Update: I have been running my '06 Imac with the failed internal drive for the past few days booting it from the internal drive in my old Power Mac G4 which is running in target mode. The two machines are connected via Firewire 400. The Imac is very responsive. I've subjected it to my normal workflow without any trouble. I'm now deciding whether to purchase a new external drive to boot from (as I am using a lot of power I think to run the G4 and Imac simultaneously) or to replace the internal drive of the Imac. Are there any issues with sleeping the computer when it is running on system software installed on an external drive?