Well, I don't have any particular advice. From what I read there seems to be several paths to that error message. The only thing I can recommend relating to Big Sur is to make a clean install and use the Migration tool, which worked really nice (almost) as I commented upon
here.
As a sidenote, but relating to your scenario with external drive: as I was unsure on behaviour I started the clean installation process with a functional EFI config on an otherwise empty
external drive (an M.2 970 card). After successfull Big Sur installation process on that drive I then used migration tool to transfer my user content from the working Mojave install to Big Sur drive. After verifying that everything was OK, I swapped the internally installed M.2 card with the external one.
In essence: I don't think that the fact that you are installing to an external drive is a factor in the error message your are seeing.