Thanks for your detailed explanation.
The answer to most of your questions depends on the details of how you intend to do it. Would you be storing your entire library on the external drive, dividing it into one library on the internal and one on the external, or just moving some of the photos into Finder folders on the external drive. - At this stage, planning to store entire library as a stand alone.
If you divide your library, at most one of the two can be your System Photo Library and attached to iCloud Photos. Normally, that would be the library on the internal drive; the library on the external drive would be a stand-alone library. Any photos outside of the System Photo Library, including those in Finder folders, would not be reflected in iCloud Photos. Ok
Having a library enabled for iCloud Photos does not by itself save any space on local disk. If you also enable the Optimize Mac Storage sub option, then Photos may save some space by reducing the resolution of the local copies of some photos when storage on that disk gets low. This is completely automated; there are few ways to affect how many photos are optimized to lower resolution, or which ones.Yep - seen that.
Calling iCloud Photos a backup is not strictly accurate. The cloud version of the library becomes the master copy, and the local library (or libraries if you have multiple devices) slave to it. Ok.
Taking local backups is still a good idea in any of those scenarios. (Be sure to use a different drive for the backups, or a drive failure can lose both copies.) Be aware that local backups can only back up what's local, so optimized photos will have backups that are also reduce in resolution. Ok.
Can you then point me in the right direction to save to my external drive or is it simple as copy and paste ?