Your broadband offers greater speed than dial-up and
is charged on a per megabytes basis. Broadband users
are prime targets for hacking.
Hackers not only like to browse through your files,
but also 'piggy back' of your internet connection to
download things for themselves.
Firewall allows applications that are meant to access
the internet (i.e Internet explorer, chat programs,
antivirus etc.) block and inform you of files or programs
trying to get unauthorised access to your pc.
Both will do the same job. However external is easier
to setup (among other advantages) than the internal.
During a storm, if you get a spike through the phone
line, it is quite possible that the internal modem will
get damaged, which in turn will damage the motherboard.
(Options: external modem or phone line surge protector).