What's the best way to (re)install Logic Studio? Need Help.

I bought Logic Studio a few months ago and installed it on my new MacBook Pro 2.4Ghz with 2G Ram, 160G hard drive @ 7200 rpm. Being new to Logic, at install, I just put all 40+ gigs of content on the computer. After a while I considered putting the Apple Loops (roughly 12gigs) onto an external hard drive to save space on my computer, just to see if it would work, then consider moving more content over later. After doing this the Logic application couldn't find the Apple Loops, and I couldn't find a way to help it see the new path, so my Apple Loops were essentially rendered useless (since I had already deleted them from the computer). So I stopped right there, and haven't done anything else. Just worked with Logic without using Loops, which I have to say is still an incredible program.

What also seemed strange was this: In moving the Apple Loops, the available disk space on the computer didn't seem to change much. It went down a few gigs, but not the 12 or so I was expecting. Not sure why that is. It seems like Logic and all the content is actually taking up around 50 gigs or so on my computer (and the Apple Loops are supposedly gone or not available). What is that about?

Feeling like I had really fouled things up, I called Apple Care. They said that the content of Logic is stored in many places in the computer's libraries and system folders, but it was really confusing trying to locate all of it, because the info they sent was from Logic 7 and older versions of GarageBand. I guess Logic 8 is too new for them to have anything on it. There is no uninstall for Logic Studio. But they strongly recommended that I perform an Erase and Install, and then re-install all my software including Logic, and then assign the hard drive I wanted the content in. That would open up a lot of the computer's hard drive space, they said. It seemed like an extreme measure to take for such a small blunder, and I haven't tried it yet, but will if it's the best option.

If I do this, is running Logic content (i.e. Loops, Impulse Responses, Jam Packs, etc.) from an external hard drive (and the one I have to use is 5400rpm--is that too slow or am I getting too picky?) the best way to go, or should I have all Logic material coming from the same machine? How do I get some of my hard drive space back?

Ugh.

Has anyone out there experienced this too? Is there anything documented about where the content is stored for Logic Studio? Is Erase and Install really the best thing to do in this situation?

So many questions...

Thanks.