How do I install virgin Leopard on external drive with iMac running Lion? I have a new iMac, quad core with Lion running. I want to install Leopard on an external drive to run some hardware that will not work work Lion.

I have formatted the external drive as Mac OS journalled and used GUID but when trying to install Leopard the Installer will not let me choose different installation drive
Short answer is: You can't. Your iMac will only boot up with OS X version that it originally came with, or newer. Since you mentioned you have a new iMac, guess is it's new enough that it won't boot up using a Leopard install, even if it's on an external drive.