I currently have Windows 7 Home Premium, and I'm thinking about upgrading to Windows 8. Is it possible to use the Upgrade to dual-boot the two versions, or will the upgrade have to overwrite Windows 7? If it overwrites, is the process reversible to get Windows 7 back if I decide I don't like 8?
Yes, it is possible. Do the following:
Now you can enjoy both Windows 7 and 8. If you don't like Windows 8, you can just delete the new partition that you created.
Also, you need to create a new partition on the internal drive. You can't install Windows 8 on an external drive that is connected through USB. The setup just doesn't support that. But there are other ways by which you can install it on an external drive.