Would @sbdpotato potentially lose a ton of money if they used the external market as proposed in this article?

No, as I explained in my top-level comment, it really doesn't matter which market you use. This is among the many misunderstandings and errors in the post.

It is possible that @sbdpotato will lose money, as it is possible for anyone using the conversion function to lose money. Since @sbdpotato is not even trying to make money (it is trying to reduce the debt ratio and haircut, and increase the market price of SBD toward $1), it probably is more likely to lose money than private actors using the conversion function. However this is independent of which market is used.

What is the specific intended goal of @sbdpotato? How is its success or failure measured?

I am not the operator of @sbdpotato, however as a contributor of some of the ideas I can give you my answer. By reducing the supply of SBD toward zero, the debt ratio is guaranteed to be reduced (assuming STEEM ratain any non-zero value). As this proceeds, the haircut will be reduced and it will become possible to convert SBD into a larger value of STEEM, eventualy into $1 of STEEM. This will eventually result in the market price of SBD returning to approximately $1, because it is impossible for SBD to be worth much less than $1 if you can convert 1 SBD into $1 of STEEM.

Secondarily, both the buying of SBD by @spdpotato and the visibility of @sbdpotato engaging in these efforts may increase confidence in SBD returning to $1 soon and encourage speculators to buy up SBD with that expectation. (If you buy SBD at $0.70 and it returns to $1, your return-on-investment is almost 50%.) If this happens then SBD may return to $1 (or at least closer to $1) sooner.

The second portion is speculative and may or may not happen. The first part is guaranteed to work as long as @sbdpotato removes SBD from the supply faster than it is being created, which is currently a low rate of about 1500 SBD per day (for SPS funding). That depends only on @sbdpotato having adequate funding (from post rewards as well as the SPS proposal) to continue to buy and convert SBD.

In fact, despite @spdpotato by itself not really having enough funding to meet this threshold yet, @sbdpotato plus other people converting has been enough to reduce the supply of SBD over the past few days. So progress is being made. With the SPS funding proposal approved, it should accelerate over the coming days/weeks.