The "iTunes Library" name hasn't been used by iTunes for several years which makes me think these are old files from several years ago.
The actual in-use library file is (now) called library.itl (formerly just iTunes Library with no extension). The .xml is a copy iTunes makes of the library.itl file in a format readable by other applications.
Without seeing your files and folders it is hard to unravel all this. You could have relic files from a bygone iTunes version. Some people still have traces of pre-iTunes 9 in their iTunes folders. Depending upon how you have your iTunes configured you could be using files from just about anywhere on your system. Most people have "organize" and "copy files to media folder" set in preferences which ensures everything iTunes uses is in limited locations but others (such as myself) have reasons for wanting to manage their own media. For the latter you can have items scattered about.
Look at the modification dates on files and folders to get a sense of what iTunes is actually using. Theoretically if you just consolidated (and set iTunes to manage your media and copy to your media folder) then anything iTunes is currently using should be either all be in your main iTunes folder or at most be in the iTunes folder in one location (everything minus media) and in a media folder in another (depending upon how you have this set in preferences).
Empower yourself to understand how your folders should look by reading these links. You're in the best position to figure out what is going on with your computer.
What are the iTunes library files? - http://support.apple.com/kb/HT1660
More on iTunes library files and what they do - http://en.wikipedia.org/wiki/ITunes#Media_management
What are all those iTunes files? - http://www.macworld.com/article/139974/2009/04/itunes_files.html
iTunes 9 [and later]: Understanding iTunes Media Organization - http://support.apple.com/kb/ht3847
Let me ask you this...Can you think of an easy way (or any way without going one by one) for me to check all my songs in iTunes to see where the files are located on the drive? Meaning, if I can open Terminal and check song locations and they all appear to be on iTunes3, then I can delete them from my iTunes2 folder.
I just grep'd the xml file in my old iTunes2 folder, which gets modified everytime I open iTunes, and found no instances of "iTunes2" relating to file locations, but did get 1595 hits for "iTunes3" for file locations. I'm assuming that all the files iTunes is looking for are located in the new folder and I can delete the old music folders in iTunes2. Does that sound likely to you? I'll backup first.
I don't use a new iTunes but I have not seen any report of capabilities to display file location easily. The information is in the .xml version of the library file but I don't think that is "easy".
There is this Dougscript:
I guess you could use it as indicated as long as you weren't already using the destination field.
It would help to have some basics here, kind oflike a doctor taking your height, weight, and temperature.
What is your media folder location as designated in preferences?
Use file modification dates to determine where your active iTunes library file is located.
Consolidating should have centralized all your media to a single main media folder, wherever you happen to have that designated. It might be iTunes 3, or it could be pretty much anywhere you wish.
The other thing, as you indicate, is to back up and try. If you delete iTunes 2 and suddenly get tons of broken links then you know you have to put it back.