Windows Easy Transfer - Internal drives as destination?

I'm investigating my move to Windows 7. I tried out the Windows Easy Transfer utility today. I was in a hurry, so I may not have done it justice.

Here is my setup and my question:

Setup: It appears that the Easy Transfer utility expects the destination drive to be an external drive, whatever that is. I never noticed a differentiator in disk manager that says one drive is internal and another drive is external. I have several disks on my machine. Some are SCSI drives, including my system drive "C:." I also have couple of SATA drives.

Question(s):
1. Is there any reason that I will not be able to move my 'stuff' from the current 'internal' drives where my 'stuff' resides to yet another internal drive, as long as it has sufficient, spare space?

1a. Does the spare space need to be contiguous?

2. ... or is there actually something I'm missing about there being something known to Windows, or its utilities, about whether drives are internal or external?

It does mention an external drive, primarily as it is designed to move data from one machine to another, so saving the data to an internal drive wouldn't often be much use. However, if you do want to save it to an internal drive then this is indeed possible. It will prompt you to save a .MIG file somewhere and you can save this where ever you like