I've setup external HD's on iMacs where the logic board sata connection got fried. FW800 will definitely be usable, but not as pure as straight SATA. I am not sure if your imac has SATA2 interface, but let's use that as an estimate. FW800 has a transfer speed of ~100 MB/sec. SATA2 has a transfer speed of 300 MB/Sec.
Are you really contemplating not using the internal drive at all? That doesn't make sense - you're throwing away performance just in case it fails. Better to buy a FW800 external (or Thunderbolt external when available), use Super Duper to clone the internal to the external on a regular basis (like daily), and switch to the external IF the internal fails.
I boot my 2009 i7 iMac from a FW800 SSD, and it works great, but I would not recommend running any machine from a platter-based hard drive over FW800 unless the internal has failed.
I use to run two or three different installs, two on externals over FW. They were really, really old backup, but convenient when I needed to access old files or a particular *AMP stack for development, etc. Heck, I've worked for weeks on an external.