>>If programmed and called properly, the external application should not stay in the memore after it finishes. How the event monitor runs external applications?
>
>External program executed using:
>Do someexternalprogram.exe
>
>The actual code reads the command line from a table and executes the line using macro substitution.

You're executing it as VFP APP (internal, in the context of the calling application) not EXE (external). You don't need to build EXE in this case. APP will work the same.
VFP caches everything that's why it still in use after it finishes. You can try CLEAR PROGRAM but I'm not sure if it'll help.