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It doesn't have to be the one the OS is on, but it does have to be an internal drive. For an iMac that's equivalent, but I used to have a Mac Pro,...
Unfortunately I don't have much of an answer. The external disk just showed up there as an option, I didn't do anything special. I'm on Catalina,...
I recently got a new mac mini and wanted to run Windows in Bootcamp, with same Windows running in Parallels - something I've been doing for a long...