What you're describing is not an externality at all. It's an explicit cost to the driver that will hopefully make them alter their behavior.

It makes the parking (end goal) more expensive to them via both time (additional time to park) and money (gas wasted during finding the parking spot), so it is reflected in the cost of the good. Thus it is not an externality.

No, if they don't care it's not entirely reflected in the good. This happens quite frequently with emissions. If you do something that causes a bunch more people to produce emissions (e.g. Lower the cost of gasoline by 90%), you are partially responsible for those externalities.

I think you're missing the point. In Amsterdam cars are guests on many roads. The transport infrastructure very much supports walking, cycling, and use of public transport. The car is a very very inefficient use of road space.

> drive around the block for a half hour looking for parking

That would be a dumb thing to do, unless you value your time very little. Why not just park in the nearest garage?

Most people don't value their time that highly. Most middle class Americans for example would rather waste the half hour rather than spend $40 or whatever to take a cab from the suburb into the city.

This disconnect is the reason a lot of silicon valley startups flounder outside of silicon valley. Most of the US population can't afford to throw away $10 to save 20 mins.