Hi jrozlove,
Thanks for following up with us. To double-check, is the external drive connected when you're trying to import photos? If not, try connecting it and see if that helps.
The alert you mentioned is shown in a screenshot in the following link, and based on the text below, we recommend making sure that the external drive is connected, and also verifying the location you have set as your System Photo Library: Designate a System Photo Library in Photos - Apple Support
"iCloud and the System Photo Library
You can use iCloud Photos, Shared Albums, and My Photo Stream only with the System Photo Library. If you choose a different library in Photos without designating it as the System Photo Library, the iCloud tab in Photos settings is disabled.

If you want to use a different library with iCloud, follow the instructions in the next section to change the System Photo Library."
You can double-check to make sure it's pointing to the library on the external hard drive by opening the Photos app and clicking Photos > Preferences > General to check the Library Location setting.
Keep us posted on what you find, and have a good day.