I believe Michael and Jeff are using both the database and the photo-library on external drives. The location of the LR database can be any local drive - this rules out Fileserved or NAS storage, at least for now. In LR preferences, change the Default Library to "Prompt Me when starting Lightroom".
I have a couple of lightroom db's on external drives (USB) and can easilly move the drives and access via separate installations of Lightroom on my laptop and desktop computer.
Although you could keep the photo's and DB on separate drives, I'm not sure the performance gain is all that significant - one *big* downside to that is it complicates backup's. Try using LR as Jeff and Michael do, especially his suggestion regarding backup location when importing - I'm convinced these really are "best practices", at least with this version.