Okay,
Then we CAN use that drive if you think you're fine to do so.
You can use the Disk Utility App you have on your Mac, now, to erase and reformat that external drive as an OS X Extended Format (journaled) with a GUID partition scheme. One of the tabs on the right window in Disc Utility will let you partition that drive into more than one partition.
Do an info (Command-I) by clicking once on your iMac's hard drive icon to determine how much space your entire system and all the stored data there takes up.
As a buffer, you can add, at least, another (50 GBs) to that total (I,usually, add an additonal 75 GBs additonal space, but I recommend, at least, adding another 50 GBs) to the Total space needed to create for the first partition on the external drive.
What ever is left on the second partition is for just data storage.
Make sure to name the external drive's partitions so you know what they are when you see them and to have a name for the boot partition that includes the version of OS X that is on that bootable partition.
CarbonCopyCloner is best as it has many other features, but it is more expensive.
SuperDuper will work too, but I believe it is a cheaper cloning app than CCC.
Either way, you will use the cloning app to make a bootable copy of your Mac's internal hard drive to the first partition of your connected external hard drive.
Before proceeding with the upgrade to OS X Snow Leopard, test the external clone by picking the cloned partition on the external hard drive for startup in OS X Preferences Panel under the Startup Disk icon and click the restart button and wait to see if the Mac boots to the external drive (this will take a little longer than usual as you are booting to an external source).
Once booted to the external drive, run in this mode and do some things to confirm everything is working fine.
Then in the OS X Preferences Panel, choose the Startup disc icon, again, to pick your Mac's internal hard drive to boot back to and click the restart button to have your Mac boot back to its internal hard drive where you can begin the OS X 10.6 upgrade process.
For future info.
It is very desirable to have more the one external backup drive as drives can and do fail and having redundant drives with duplicate data is a way to protect your data over the long term.
I have three external drives with different bootable systems on them, but my saved data partitions are identical on all of these drives.