The only problem with that is that you lose fast loading on older games. It might be faster than the current consoles because of better CPU decompression, but still.
P.S. Before this devolves into some fanboy BS, this also applies to PS5 and having your PS4 games (Such as the PS+ collection) on an external HDD.
P.P.S. I am highly looking forward to independent testing on how much external SATA SSD improves load times for BC games. That might be the happy medium between PS5 needing fast, but pricey NVME drives and Series needing an expensive proprietary expansion.