Great question. I have this question as well. Too bad no one bothered to answer. Got here via a Google search on this same issue.
FYI still an issue in NPM version 11.
In my case, I am monitoring a node that I no longer want to see up/down alerts from, but still want to pull configs from it when it happens to be up. (A Cisco test bench switch)
I realize that I can do this via custom properties, but it would be so much quicker to just turn it to an external node in NPM.
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Answering my own question. The trick is to convert the node from SNMP to ICMP and save. It will ask to delete all SNMP data for the node. Then edit the node again and external will now be an option.
This answer is for people that come after me that are Googling this issue.