I have two external drives attaching to my Mac, one for file storage and one for time machine. The latter one keeps the TM backups of the former one. If someday I lost the former one is it possible that I could just buy a new drive and restore the data back to the new drive easily?
Yes. Enter Time Machine, select the item to be restored, then press control and select "Restore" from the on-screen button. You'll be presented a finder window in which to select the restore destination. More at Pondini.