It is certainly possible. Exactly how depends on the virtualisaion solution you run (I've not used Fusion), but essentially you should just be able to copy the files representing the VM over to the external drive and point VMWare towards them.
Performance wise you should be fine on firewire 800. I run a small XP VM of a USB connected external drive (maximum data rate somewhere a little over 20Mbyte/sec) on my netbook and while I'd not use it for Visual Studio 2010 it works pretty well for the basics (IE for testing web compatibility, Office 2003 for similar reasons). A good drive with a good firewire controller may well be as fast as the drives that were common at the time of XP's release. I've not used a Firewire 800 connected drive personally, but if I remember rightly the real-world speed of the interface is usually rated at three or more times that of good USB interfaces so as I find USB "good enough" firewire defitely will be unless you have a very IO intensive task to throw at it or are difficult to please!
It won't be as fast as when running off your internal SSD of course. If you do notice a speed difference large enough to bother you, make sure you've given the VM enough RAM so that the guest OS isn't needing to use the page file much, if at all.