Yes it works fine when the hard drive is connected. When I disconnect it says files are missing.
Don't you think this suggests that your files are on the hard disk and so you need to connect your HD to make your files available in PSE or any other programs that use or need to use these files.
You may not know but PSE's organizer DOES NOT COPY OR MOVE FILES from its original location. All it does is create the appropriate links to make these files available.
This difference in behavior comes from Windows. On Windows external hard disk drives are mounted as 'hard disk drives'. That is they are treated as internal hard disks. Where Pen drives/CD/DVD disks are treated as 'Devices with removable storage' or as external disk drives.
So if you have imported any media from external disk drives and you detaches it, the file imported from it will be shown 'missing' files where in case of pen drives/flash drives/CD/DVD, they will be shown 'offline'.
Thank you very much. I wondered if that was the case. At least now I know how to avoid that in the future. I do like the option of having the preview files available for slideshows, etc, but don't want to actuallly keep thousands of photos on my computer hard drive. What I had wanted to do was to move the files as I did in prior versions and have only the "proxy" or preview file available online. At least now I know that if I move them to a CD or Flash drive, I can accomplish this. I will still keep an external hard drive with copies of the photos as a backup. Thanks again for your help. I appreciate it!
Mytaxsite says exactly the same thing as Andromeda. You say yourself that you have moved the pictures to the external drive. Once they are moved it's obvious you can't access them from the internal drive.
There are two ways to 'move' the pictures : either from the explorer, outside PSE, or from the organizer. If you move your pictures using the organizer move menu, you ask the organizer to move the pictures, which it does, but it updates the new location at the same time. You have no 'missing' files to reconnect.
If you move outside of the Organizer, the new location is not updated and the paths recorded for each file in the catalog are wrong. In that case, all your files are 'missing' and the organizer can't find and open them. You have to 'reconnect' them.
"You may not know but PSE's organizer DOES NOT COPY OR MOVE FILES from its original location. All it does is create the appropriate links to make these files available."
That's what is important. The organizer does not copy or move files on its own account, it does so if you specifically ask it to do so.
In other softwares, files are often duplicated into a location specific (often hidden and not accessible) to that software, but that's not the case with the organizer (same with Lightroom).
The organizer stores the path and many data present in your pictures files metadata, date, camera etc.
And what is important and may answer part of your original question, it creates and stores a thumbnail of your pictures to enable you to browse your catalog even if the media is offline.
If you don't see the thumbnails, it's because they have not yet been created (it takes some time to do the job in the background).
Connect your external 'offline' media, select the files with missing thumbnails, and choose 'update thumbnail' from the contextual (right click) menu. That should restore your thumbnails and make them available even when the media is offline.