What is the best way to set up Premiere Pro as far as disks arrangement? I have the prgram running off my internal 250GB harddrive. Everything else is running from an external connected with USB.

Will this effect render time and playback clarity?

Yes.

http://livedocs.adobe.com/en_US/PremierePro/3.0/help.html?content=WS6FD6C7B1-11DF-45c4-9703-4288DDE57377.html

I would set all you temp files to the internal drive, as the USB drive will have higher latency.