Chances are that this location request is triggered by a Folder Action/AppleScript running into an incorrect or deleted alias or path.
I agree that the request is prompted by an AppleScript script, but I don't think the problem is an incorrect or deleted path; more likely, it's simply that when Douglas boots from the external and the script runs, it encounters a reference to System Events (a faceless application which figures prominently in certain types of scripts), and since there are copies of System Events on both the external and the internal volumes, AppleScript throws up that dialog in order to learn which version to use.
As to why the dialog lists all
applications available on these volumes, I think that's because the dialog is designed for any situation in which a script can't unambiguously locate a specified app, and this often includes occasions on which the user may have changed or modified the name of the app. The only way to be sure that the choices offered to the user include the correct app is to list all of them.