What's better, internal or external fuel pumps?

This question depends less on where the pumps are, and more on what pumps you're using and the applications. When placed properly and equipped with the proper pump, external designs can be reliable and more serviceable than internal ones. That said, internal fuel pumps can deliver fuel consistently with nearly any pump, so long as the pump is properly matched for the engine. In the past, internal pumps have been a hassle to mount in fuel cells primarily since the only way to mount them was by the manufacturer and servicing meant pulling the entire fuel cell apart. Currently, more and more manufacturers are offering reliable pumps designed to be installed in aftermarket tanks and fuel cells. Because of this, the cost of adding internal fuel pumps has decreased significantly, often times making an internal system cheaper than external ones. When deciding on where to place the pumps you must first know how much horsepower your vehicle will make and how much fuel it will consume; from there you can identify which pumps are best for your vehicle and begin comparing costs to internal vs. external mounting of the pump.

This is a common question we get and perhaps the most loaded one as well.  In short, it depends on the application.  Most vehicles benefit more from internal pumps than external ones simply because internal pumps are more reliable.  For ultra-high horsepower applications, external pumps are often the best choice as they can be larger than internal ones and, consequently, can be built to support more horsepower than in-tank versions.  By moving the pumps inside the fuel cell the chances of vapor-lock or cavitation are greatly diminished, ensuring consistent fuel delivery at high altitudes or with hotter fuel making internal systems a popular favorite in off-road and rally-style racing.