restore vs rebuild vs repair

iIt is not safe to store your Photos Library on a NAS. Photos will lose the connection to the library on the NAS and will need to restore the library or repair it. If you are keeping your library on a drive on your local network you are risking transmission errors and library corruption. Move your Photos Library to a local drive with a wired connection. The external drive should be prepared as described here: Move your Photos library to save space on your Mac - Apple Support

And see the warnings in the link above:

"You can't store your library on a storage device used for Time Machine backups. And to avoid possible data loss, don't store your library on a removable storage device like an SD card or USB flash drive, or on a device shared over your network or the internet, including over a cloud-based storage service. ...

Always make sure that your storage device is turned on and available before opening Photos. If Photos can't find the device, it stops using the Photos library stored there."

With an iCloud Photos Library you would need plenty of cloud storage to hold all your Photos.

Then you can save storage locally on your devices, if you enable "Optimize Mac Storage" in the Photos > Preference (Settings) > iCloud.

Use iCloud Photos to store photos in iCloud - Apple Support

Photos will then remove some of the high resolution originals from your Mac and replace them by smaller, optimised versions, when your Mac is low on storage.

On the iPhone enable "Optimize iPhone Storage".

The drawbacks will be:

• You will need a paid cloud storage subscription
• You will need an internet connection, whenever you want to work with optimized versions of your photos, as Photos will need to download the original from iCloud.
• It will be more complicated to make a backup of your photos, as Time Machine cannot backup optimized originals. You will have to export your originals regularly to back them up.

But the bonus will be, that any changes to your photos library will be perfectly in sync across all devices, any imports photos and videos, any adjustments, metadata, albums, folders.

iCloud Photos does not work with referenced images. You will have to consolidate (File > Consolidate) the originals into your Photos Library, before you can sync the library with iCloud Photos.

There is no documentation on where it is safe to store the referenced original image files, but they should be on a volume that is always mounted while you are logged into your user account and the volume should be formatted MacOS Extended (Journaled) or APFS, or you will have problems with some filenames.

Several users reported problems with keeping referenced files on a NAS after the upgrade to Monterey. I would not risk it.

I see no other option, but It will be a lot of work to reconnect the referenced images, after you move them to a different volume. The support for referenced images is very basic in Photos, and on Big Sur and Monterey I found it very difficult to reconnect referenced originals to my Photos Library when to originals had been move to a different volume.

On the long run, consider to keep the complete library on an external volume, not just the image files, tp avoid the problems with a referenced library.

Or keep the library on your internal drive, but use iCloud Photos to save storage.This will also make the syncing between your devices easier, if you are having an iPhone or iPad as well.

As you say. I hope you can tame the beast 😊