Automatically external emails from your organization become "External Users", no need to selected them as external.
I would LOVE this option, a resource to create a external users, I have a use case where my internal users need an app to create external users, and since this is gated for enterprise only, but they recently released Portals would be greate to create users from a option from this dropdown.
Hope with more feedback from us they build it soon.
I had the same question. After a quick test, I think Retool handles this automatically.
Basically, when you go into Settings and invite the new user (using the blue Invite button), even though you can't select "External User" as it's greyed out, as long as the new user's email address is external to your organization's domains, they'll automatically be added to the External Users permission group. This is in line with the Retool docs.
I believe the list of your organization's domains is under Settings > Advanced Settings > Auto-join domains -- but happy to be corrected on this if this isn't actually the right list.
For example, if your organization has one domain, tomatojuicepieclover.com, and you're inviting a user whose email address is literally on any other domain (say, random@gmail.com), then this new user will automatically be added as an "External User". However, if you're inviting random@tomatojuicepieclover.com, then they won't be an external user.