How install MacOS on internal SSD (from fusion drive) and then use external SSD for applications?

I have a 2019 iMac 21.5" which has a 1TB fusion drive. But the HDD is getting old and slow (and it obviously wasn't fast to begin with). Until recently, I also had Windows Bootcamp installed on the HDD, and it was horribly slow. To fix this, I bought an external SSD and now I boot Windows 11 on it via EFI. It's so fast, it's actually better than using my Mac partition. So I want to make the Mac side faster by doing a clean install of MacOS Big Sur to the 28GB SSD and then partition the new 480GB SSD: 240GB for Windows 11, and 240GB for Mac applications and commonly accessed data when running MacOS. This leaves the 1TB HDD for storage of files/application I use rarely. I assume I want to install MacOS on the 28GB SSD because my new SSD has a speed of 600 MBps and is connected via USB 3.0, is that even slower? So I believe the internal one is faster. However, I have a few things I don't quite understand about how everything is structured on a Mac. If I was to split my fusion drive, and then install MacOS to the 28GB SSD. How do I tell the Mac I want to use the external 240GB partition for Applications, Library, System, and Users? I assume having these on SSD will speed up my Mac (please correct me if I'm wrong). I'm also very confused about what the Macintosh HD/System folder actually is and how this fits into what I want to do. I want to know exactly what I need to do before I attempt this. Any help would be greatly appreciated.