How to download entire iCloud photo library to external drive attached to my MacBook
Sure. Once your library is safely moved to the external, change the setting in Photos to download all images.

Can i store and access iphotos library on external hard drive (and still have it backup to my cloud network)?
https://support.apple.com/guide/photos/download-photos-to-your-mac-from-icloud-phtfa50fd1ec/mac
Verify you’re backing up your Mac and the external drive
Wait a week and then delete the old photos library from internal storage so you can free up that space and not have two libraries and metadata hanging around

Apple documents step 1 as well - https://support.apple.com/en-us/HT201517