From everything I can tell and have read, DLC and Add-ons must be on the internal hard drive, but I never tested as I have a drive large enough for my games.
I will try an experiment later.
Aurora will need to know where the title updates are located.
I'm not sure if Aurora will see them automatically if put in content. From my understanding of how this works, TU's are like a zip file that get extracted once downloaded.
If you have TU's on a flash drive for example, you can go to Start > Content. You can add a path for TU's and click the scan now button. Any TU's found will be copied to a cache.
You need to then enable the TU's you want active. Aurora supports having multiple TU's on a system. To enable a TU, press Y on a game. 2nd icon down, left side, image with a controller and a down arrow.
You can enable/disable/download TU's from here.
Games can be on a external HDD/Flash for sure.
Aurora dosen't care about DLC or Add-Ons, the Xbox OS does. As long as the DLC-Addons are in the 0 Folder when a game starts it will check that folder for everything automatically.
I let you know the result of my experiment.