I have a smart playlist (audio books) that is 40GB in size, so backing it up to a DVD is not a great option. I do have an external 500GB firewire drive. I see that I can "Burn playlist to Disk", but I would like to back it up instead. Is this possible (from iTunes)?
20" iMac G5 (iSight), Mac OS X (10.4.11), - 17" iMac G4 FP - 2 iPods - iPhone 3g 16GB
Drag you iTunes folder to the ext HD and copy it over. There are programs such as Synchonize! X Plus which can do incremental backups (www.qadea.com) - that way only the files that have been changed get updated hence the next backup is much shorter.
Just to be clear, the procedure you did creates a copy of each file that is in the Smart Playlist at the time you dragged them over. If you restore them at a later date, you will have those files, but you will not have the rules of the Smart Playlist. Is that what you wanted?