I would go to iTunes preferences and check checkboxes:
- Keep iTune media folder organized
- Copy files to iTunes media folder when adding to library
Then drag, lets say one album to iTunes (this would copy that album files to iTunes library) if everything is ok - keep moving your music to iTunes and when it is done right click on some copied albums and choose show in finder. The album files locstion should be something like ~/Music/iTunes/iTunes Media/Music/ARTIST/ALBUM where the ARTIST and ALBUM are the real names of that artist and album then you can remove the files stored in Public folder.
iTunes 10 for Mac: Consolidate your iTunes library - http://support.apple.com/kb/PH990
How to Consolidate Your iTunes Library and Keep It Organized - http://www.switched.com/2010/11/02/itunes-consolidate-library-keep-organized/