Having run into the third person who interprets WP:EL as a mandate to cut external links out of articles I've written or rewritten, I think it's time to explain what I'm doing.
(UPDATE, May 23: For now I have stopped adding external links entirely, except as references. George Dance (talk) 15:45, 23 May 2011 (UTC))
It is my own view that the following should be reflected in wikipedia practices.
Where edit
I use external links not only in the EL section, but as references, and also in bibliography and text sections. In a text section of an article, I will use an EL where I would use an interwiki link if one existed. (Hence my standing offer to any editor who objects to my EL's: you're free to remove an EL if you substitute an equivalent interwiki link.
What edit
I use ELs to two types of pages: 1) encyclopedia entries, usually on persons), no different from a link to a page on Wikipedia (except for the fact there is no page, and might never be a page, as the person might not be 'notable' enough for Wikipedia); 2a) individual poems that are discussed in the text, no different from a link to a page on Wikisource (except for the fact there is no page, and might not be one for a while, and in some cases will not be one for a while due to copyright reasons). 2b) the text of entire books of poetry (these appear only in the bibliography sections of some articles).
Why edit
For the same reasons as interwiki linking. If a person runs across a new name, I'd like him to be able to look it up in one click. If he runs across mention of a poem, I'd like him to be able to read the poem with one click. Burying a link in the footnotes does not do the same thing; setting up one more block to the external information makes it far less likely to be read.
But why not just add the person to Wikipedia, or the text to Wikisource, and then add an Interwiki link? That cannot always be done. An entry to another encyclopedia does not guarantee that a subject is 'notable' enough for an article to appear on Wikipedia. Copyright considerations mean that many contemporary poems are blocked from Wikisource. Even in the cases where it can be done, it is a tremendous duplication of effort in the name of "policy."
Whom edit
Not just anyone should be linked. The criterion I've used is: If a site is reputable enough to be cited (and linked to) as a reference, it's reputable enough to be linked to elsewhere in the article. Sites I link to include the Canadian Encyclopedia, New Brunswick Literary Encyclopedia, Canadian Poetry Online (U of Toronto), and Poetry Foundation.
(UPDATE: The following section dated May 20 is not part of any proposal to Wikipedia, since it cannot be made part of a policy decision. As of May 23, I will not be adding any links to my blog.George Dance (talk) 15:42, 23 May 2011 (UTC))
I also publish a poetry blog, where I post hard-to-find poems; and if I can't find a poem on one of these reputable sites, I'll link to it on my blog. This has caused a couple of editors to call me a spammer, and to march through my articles hacking and slashing out EL's and anything else they dislike. On the other hand, many people a day use the links. George Dance (talk) 17:20, 20 May 2011 (UTC)
How edit
I am confining adding these sort of ELs to "my articles", meaning: articles that I've created (written from scratch) or adopted (significantly rewritten from stubs, etc.) -- the criterion being that my contribution was significant enough for the article to be on my watchlist. While using poems from my own blog were and still are a last-case scenario, their use has allowed me to measure how many people like and will take advantage of such links.
If you don't like it edit
Then, by all means, feel free to replace external links with interwiki links. That means either (1) adding an appropriate article to wikipedia, or (2) adding an appropriate poem or book to wikisource. I have done (1) myself. I am not in favour of (2) -- text of poems being so much easier to change on wikisource than on any of the external sites -- but I'm a reasonable guy who is willing to make that much of a compromise: anyone is free to eliminate anything from any of my articles so long as you there is no loss of information.