Hello,
all configuration should go in the tomcat/shared/classes/alfresco/extension directory or the tomcat/shared/classes/alfresco-global.properties file.
Regarding external authentication it is important to know that by default, Alfresco tries to validate the client passing the modified headers via a client certificate check. Unless you are actually using SSL and a client certificate, you have to disable that or Alfresco won't actually accept the modified headers. Last time I used this for a development setup, this amounted to setting the "external.authentication.proxyUserName" property to the empty value / string.
The reason you need to enable SSO on a different authentication subsystem is that the external subsystem alone only overs the Explorer UI and web scripts via the /wcs or /wcservice endpoint. The SSO filter for NTLM / Kerberos call the logic for header evaluation (of the external subsystem) on the other HTTP servlets…
At least that was the case the last time I worked with external on 4.2.x. There might be differences between the Alfresco versions concerning default configuration.
Regards
Axel