Hi ,
I understand I've had a similar problem. You'll need to format the external SSD drive so it's not recognized as a VHD in the Microsoft Store.
Use Diskpart or Disk Manager.
Go to Microsoft Store > Settings > Game installation options > enable the option "Ask me for these options every time I install a game."
Remember, if you select the external SSD drive during any installation, it will ask you to create the folder. It will be recognized as a VHD in the Microsoft Store and Xbox. The process is the same.
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Thanks