They are a major handling and speed advantage for 90-100mph boats, for cruisers and slower boats they can have less than optimal turning at low speeds, but still get the job done. I haven't made one yet personally but i have seen quite a few and have a good idea of how i'd like to build one. A great example of bitchin external rudder is on the 21' Brummett that was in hotboat a year or so back called 'Tinker's Toy'. that is probably one of the nicest external rudder setups around. It has detachable blade pinched into a peice of 4.5" stainless turned down to about 1 3/8" for the shaft. I like the 2 peice system, although it's alot of work, it'd definitely be worth it to build it that way.
With the Morse Command 2 Dual cable steering now discontinued i'd like to build one with an external hydraulic steering set-up with shorty rams on the outside. It would free up a ton of room on the inner transom and make it a dream to clean your bilge/transom and keep everything shiny.
I agree with Racey. I have driven both internal and external rudders and he is spot on with them working less efficiently at slower speeds. I have a hydraulic external rudder on my Schiada and it works sweet. There is no prop wash imput at any speed. It is the same set up as the Action Marine Schiada in the post above.
The set up on Tinker's Toy is by far the trickest set up of an external rudder that there is out there.