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The internal memory is mounted as /storage/sdcard0, which is also symlinked as /mnt/emmc and /emmc for back-compatibility; similarly, the last partition on your card is /storage/sdcard1, /mnt/sdcard, and /sdcard. Some apps are better than others at finding this storage, so you may have to move some files or use Advanced Settings before some apps are useful.
When do you get the search failure message? Are you trying to search? There may be some launcher gestures or icons that bring up that verrrrry sloooowww search function; my launcher's Google Search button takes several seconds to come up for me, even longer than the browser.