If your internal drive fails, you can swap for the external drive and most likely it'll boot like normal if you use the same connections. If not, just go into the BIOS and select the former external drive to boot first. Or hit the F12 key at boot and select the external drive. I don't think you'll have to do all that though. Just swapping the drives should do it.

And yes, you can clone a larger drive to a smaller one as long as you shrink the partition first. Preferably smaller than the smaller drive and then you can increase it once you're up and running with the new one.

How often are you planning on doing these clones? Personally I wouldn't do them very often. The data backup is the more important part that should be done constantly.