Actually you can run them enternal or external, makes no difference. My closed loop is almost exactly like the one pictured although I use tubing so have less elbows.
I actually have two of them running on my system and they both have gone over 2 years without problems. I had one freeze up recently but it soaked clean with a little vinegar and is back in action. Considering how little maintenance I have given them they have held up pretty well.
Everyone swears they kill flow, but I think for the price, they are nice little device.