How do you handle the massive amount of rocks excavated? Should I designate exterior stockpiles for all of the low end stuff?
Some players consider this an exploit, but especially for stone it's highly useful: designate a small (as small as 1x1) activ(i)ty zone, mark it as a (g)arbage dump, (a)ctivate it and make sure any other garbage dumps you have are inactive. Then designate for (d)umping all the stone that's in your way (the hard way, by loo(k)ing at each tile with stone on it and marking each one individually, the less-than-hard way by selecting a dump designation (d-b-d), or the easy but perhaps too comprehensive way of going to the z-stocks screen, finding that kind of stone and designating all of it in your entire fortress).
This preserves your stone for making crafts out of, so you might want to make the dump zone somewhere near your masons'/craftsdorfs'/mechanic's workshops. Another option is to use a dwarven atom smasher, which eliminates the stone so it doesn't cause you lag (essentially a 2x1 raising bridge at the smallest, over solid floor, which crushes anything under it out of existence when it comes down).
Good explanation. The next step is to "reclaim" the stone, since it'll be "forbidden" after it is dumped. You can do this with d-b-something (just like marking an area of stone for dumping, mark the dump tile "reclaimed"), or use the z-stocks screen and press 'f' on the 'F'orbidden stones. Until you do this, it'll be forbidden, which means it won't be used for anything at all.
One minor side affect of all this dumping: if you somehow mark a workshop's component stone for dumping (the stocks screen method will do this), the workshop will work still fine. If you ever disassemble the workshop however, the dwarves will dump the material.
And if I create a custom stockpile for some rocks, while some stockpiles are for all rocks, will the special rocks be placed preferably in their custom stockpile, or not?
I don't know, but I suspect the pathfinding involved here may be slightly odd; I think things get placed in the closest stockpile that accepts them, so that may turn out to be either one depending on where the target stone is to begin with. You can edit stockpile settings on-the-fly, though, the same way you add tasks to a workshop (the q key) so I'd suggest simply making a specialized stockpile for the stone and then disabling it on your other stone stockpiles (if you end up using them at all: see above method).
Pretty sure they go to the nearest applicable stockpile, yeah.
To have the stones go to the more specific stockpile, either:
1) Deselect the special stone type from all other stone stockpiles, so it'll only have one place to go
or
2) Have the special stockpile "Take from stockpile", and select the normal stockpile. Dwarves may still bring things to the normal stockpile first, but then they'll shift special stones to the special stockpile. I use this a lot.