When editing an existing household contact in CiviCRM that has an external ID set, this error is produced upon saving the updated contact:
Please correct the following errors in the form fields below:
- External ID already exists in Database.
Verified on demo.civicrm.org. Steps to recreate:
1. View this contact: http://demo.civicrm.org/drupal/civicrm/contact/view?reset=1&cid=754
2. Click 'edit'
3. Click 'save'
AFAIK, this issue does not affect individual contacts with external IDs set.