Moved your post here to "OS X Apps......" since it has nothing to do with "Movies and Video" where you placed it.
To answer your question: Yes, you can create the virtual machine using Parallels 8 on an external hard drive and then install Windows 7 to it. However, be aware that it will run slow since the connection is not internal. USB, even USB 3.0 will be slow compared to installing Windows 7 with Parallels on your internal hard drive. If you're running out of space on your internal hard drive, then you need to install a larger one. Not easy to do with an iMac though.