The external extractors first appeared in the early 2000's with the start of US production. The change was made due to SIG choosing to machine the slides (CNC milled) from a solid blank instead of the old stamped/welded construction method. This was chosen because CNC machining had become less expensive to setup, and is definitely more versatile for production changes.
As has been stated, SIG continued to produce P series pistols with stamped slides and internal extractors, at least in limited runs.
In general, neither design is better/worse than the other. I have owned (and continue to own) both.
Getting into specifics, there are at least 3 distinct production models of external extractors which have been used, and they DO differ in quality, due to differing methodology in both manufacturing and quality control.
Here's the rundown of the external extractor variations:
1) Original external extractors - cast, extremely high quality, definitely equal in performance and reliability to the original internal extractors.
2) MIM external extractors, short version - MIM, higher rate of failure. Rejected for MIL contracts during its debut in 2004.
3) MIM external extractors, long version (current production) - MIM, lower rate of failure than #2, but still not as good as #1. Physically much larger.
Idk about the short extractors they use today on the MK25. They're either #2, a newer improved version of #2, or they went back to casting them. I lack intel on that. All mine are either #1 (cast) or the old internal style. I personally will not buy a SIG with #2 or 3, but plenty of people do, and many without problems.