If your external display isn't connected, what happens? Does Hyprland ignore that line from the config without an error and everything works normally?
It's ignored. This setup wouldn't suffice if my external displays used different scaling though, currently they all work fine at scale 1 for me.
# external display
monitor = DP-3, preferred, auto-left, 1
# internal display
monitor = eDP-1, preferred, auto-right, 1.333333
I don't really need it, but maybe my setup is too simple. I set my laptop monitor to auto-right, external display to auto-left and that's it. Set it and forget it for me.