Hi RKnutson and welcome to PCWorld.
Okay, as you can expect, you are going to get a lot of varied and passionate responses regarding upgrading to Vista or sticking with XP. If I may add my two cents on this subject.
As you can see by my signature line, I just finished a major upgrade and, in doing so, have Windows Vista and Windows XP in a Dual Boot setup. Personally, I really like Vista. At first, I was not too impressed; however, as time went on, I definitely see the performance difference between Vista and XP. Now, I must stress, as everyone else has said, your computer system resources
must be sufficient enough to run Vista smoothly.
Now, concerning your file on the Western Digital external drive. The location of the files, or even the type of file, has no bearing on whether or not Vista will be able to successfully open the file. For example, if you currently have Office 2007 installed under an Windows XP setup and would like to access the files within Windows Vista, you need to install Office 2007 under the Windows Vista Operating System.
Since you, and I would gather to say the vast majority of the computer world, has become accustomed to Windows XP, it will take some time for you to become acclimated with Windows Vista. If you truly do not want Vista, there are certain things you need to realize before you downgrade to Windows XP. This
Document will show you all you need to know about how to downgrade from Windows Vista to Windows XP.
If your laptop has both the system resources and the hard drive space, you can consider a Dual Boot setup. Now, when I say system resources, I mean a minimum of 2GBs of RAM and at least 160-250GB of hard drive space. Since you have not told us your laptop's manufacturer and model number, we cannot tell you whether or not your computer can handle a Dual Boot set up.
By the way, I posted this using the Windows Vista portion of my Dual Boot system.
This is my personal Dream PC:
http://forums.pcworld.com/blogs/mphenterprises/2007/12/21/my-gift-to-myself