That is a different configuration than I’m used to. Having the project on a external drive and not native formatting could be trouble. The beta XCode might be problematic too. I’m using 13.4 and it works well (didn’t realize a new XCode was out, my app store shows 13.4.1 as the next production upgrade). I would imagine that Unreal has not qualified on a beta so that would be a red flag.
Sorry I can’t be more help but it looks like something is keeping it from creating your XCode project. Mac’s work fine with UE4 and 5 as long as you don’t deviate too much from a stable configuration. Hopefully someone else can tell you if they are successfully running XCode 14 beta. In my experience of the last 6 or 7 years, I’ve normally seen that new XCode’s do not work out of the box with UE. I wait a long time before moving to a new XCode.
A solution for the XCode issue would be to use VS Code for your IDE. There are docs on how to install it but it’s not for the feint of heart. I did it once when a version of XCode had some issues. I think it took up less space too which sounds like you’d benefit from that. It’s not my first choice.
In the meantime, I’ll test our project on another machine tomorrow that uses a large external SSD (though it’s macOS Journaled so no such test would be definitive). I don’t think we’ve tried to run from it, it’s mostly just to have extra space for the modeler’s voracious storage appetite.
I also might mention that I spoke with someone two days ago on here with 8GB memory, it was a no-go for him (so hopefully you have more than that) though I wasn’t able to personally see the config.