no, USB 2/USB 3 refers to different speeds allowed by the port. USB 2 is an older/slower port type than USB 3. whether a movie plays smoothly depends on the speed at which your external HD transfers data to your laptop. you could have, for instance, a brand new high grade external HD with great transfer speeds and USB 3 ports, but if your laptop is a bit older and only has USB 2 ports, there will be lag time no matter what. (unless there is some new fangled application that can fix the problem)
that's as much as I can tell you since I do not have an external HD. however, in my experience, I've yet to come across any video container that VLC can't play. the program can be used to adjust almost every aspect of video/audio that might need tweaking. it has straightened out many a buggered-up torrent for me.
in the end though, it's up to what works for you and your particular set-up. good luck to you!

defrag the external drive..it may be the read heads are jumping all over the place. May also be your drive going to sleep too fast and adjusting the options in Advanced Power Options telling it not sleep may fix the problem.

There's no way I can defrag it,bc all of my movies are on it and I don't have enough space on my laptops hard drive to transfer my movies. How do you adjusting the options in Advanced Power Options...

Control Panel -> Hardware and Sound -> Power Options.
Seeds you just gave me a great idea!

Interesting. Might take a look at BS player. VLC is totally self-contained, that's why you don't need codec packs for it to work, just to let you know. That's why it's also so popular.

Good to know that BS player helped you out. I usually keep it installed, but like VLC's interface much better.

Moved to tech talk and help.

wow, it downloads subtitles automatically...very cool....so is this thread solved?? If so, please edit the title and add the word SOLVED