GRUB probably just replaced the MBR on your internal HDD. What GRUB does is it uses the file /boot/grub/menu.lst from your linux partition to give you a list of operating systems to boot from. If you deleted/removed your linux partition, suddenly the OS list is unavailable. Easiest way to recover the MBR is to use the recovery console from a Windows cd/floppy to restore the MBR.
As for removing your linux partition, use GParted (it comes with most ubuntu live cds) to remove the linux partition and grow your storage partition.
Sorry for the question but why would someone install an OS (I hope that Ubuntu is an OS, I don't know Linux and its different versions) on an external HD?
Unlike Windows, Linux allows for portability, meaning that you can install Linux onto an external (or a flash drive), stick it into another computer that supports booting from USB devices, and boot your OS.
Or something like that. Correct me if I'm wrong.