Hi charliemcf,
Step One: Make Sure Your NAS is Mounted
Okay, so I have my entire iTunes library on my NAS. So in order to see the iTunes content correctly in iTunes, I must have my share, media, mounted and ready to go before I launch iTunes. This is a hassle, I know, but I created a simple Automator Application that mounts my media share upon login or startup. This works by adding my custom application to the Login Items in System Preferences/Users & Groups/Login Items, so it automatically executes upon startup or login. (BTW, if you unmount the share, then you will need to remount it manually in order to access your library.)
STEP TWO: CHANGE YOUR ITUNES LIBRARY LOCATION TO YOUR NAS
For the moment, leave your current library where it is on your computer. Open iTunes and select Preferences in iTunes/Preferences in the menu bar on top. Go to the Advanced tab in Preferences and find "iTunes Media folder location". This is where you establish the location of your entire iTunes Library. Yours probably says "/Users/yourname/Music/iTunes/iTunes Media". To change this simply select the "Change..." button and navigate to your mounted NAS share and then to the folder where you what it to reside and select "Open". Mine is in the NAS default media share, "/Volumes/media/Music/iTunes/iTunes Media", but yours may be whereever you choose so long as it's on your NAS. If you are using your default media share too, then you will need to create a folder called "Music", and then a folder within that called "iTunes", and then another folder within that one called "iTunes Media". So "/Volumes/sharename/Music/iTunes/iTunes Media" Essentially you are rebuilding the same structure that exists on your computer. You should now see your new location in the Preferces/Advanced window. I also check the box for Keep iTunes Media folder organized and Copy files to iTunes Media folder when adding to library, so that everything stays nice and organized. When done, select "OK" to confirm your new iTunes settings.
STEP THREE: COPY ALL YOUR ITUNES CONTENT FROM YOUR COMPUTER TO YOUR NAS
Locate your iTunes library on your Mac. The default location is "Macintosh HD/Users/yourname/Music/iTunes/". You want to copy the "iTunes" folder into your NAS Music folder. When you do this it will tell you, you already have an iTunes folder on your NAS, do you want to replace it. Yes, you do want to replace it, they are just two nested empty fodlers. Depending on how much content you have, this could take a while. I have 5 TBs of content conected through Gigabit ethernet, so it would take like 24 hours to copy. During this time, using your computer will slow down the process and using iTunes will cause issues as well, so try and avoid using either until all content is copied.
STEP FOUR: TEST YOUR CLONED ITUNES LIBRARY
So now you have a copy on your Mac and a copy on your NAS. Quit iTunes and relaunch it. Go into Preferences and make sure your are still pointing to your NAS. If good, then test playnig a track or movie. If good, try selecting a track in iTunes, right-click it and select "Show in Finder". This should take you to the NAS copy of your iTunes folder. This should all be expected if everything transferred smoothly. At this point you could safely delete your iTunes library on your Mac.
OTHER CONSIDERATIONS
When your NAS share is unmounted
This occasionally happens to me and a Podcast will start downloading. It will default back to your orginal iTunes folder location. To fix this you must quit iTunes, mount your NAS share, relaunch iTunes, then open your Mac iTunes folder. You'll see it's mostly empty with the exception of any recent additions. Just simply grab the media files themselves and drag/drop onto your iTunes window. This will copy them over to your NAS and enter them into the iTunes database so it knows where they are. Delete the Mac copies and resume using iTunes as normal.
Occasionally, I unmount my NAS share and try to play a track in iTunes. iTunes gives me an alert that it can't find the track and wants me to locate it. Instead I cancel, quit iTunes, mount NAS share, relaunch iTunes and resume where I left off. I suppose you could locate it by mounting the share and the navigating to the file, but I find it easier not to navigate to it and just restart everything.
Occasionally, I want to watch a movie on Apple TV and the share is unmounted. The movie info comes up, but the artwork does not. To resolve this, simply do an iTunes rest as described above and reload your Computer in Apple TV to correct the disconnect.
Again these little issues are a pain, but the Automator App helps, and leaving my entire system on all the time helps too. Hopefully, Apple will add robust functionality for NAS iTunes library. I would prefer to access my iTunes directly from my NAS, but Apple wants to keep everything tethered to iTunes.
Copy content directly into iTune
Another route you could take instead of copy your iTunes folder content onto your NAS Music folder would be to copy your content from your Mac iTunes folder into your iTunes App window. This would rebuild your database in the process of copying it. I have noticed some issues with this method and the new iTunes 11 in that iTunes hangs forever when dropping a folder of song files or a group of folders that contain movie files. I'm not sure if this is unique to me or if there is a larger bug in the new iTunes. I was successful with this method in iTunes 10, however.
Accessing your content over your network
Other computers will have access to your NAS content. I have not attempted to use a second iTunes to try and Sync two Mac libraries. I think if two computers are trying to write to the database at the same time, this could cause issues and corruption. I wish there was a robust iTunes solution on the NAS, but that's not the case. There is an app on your NAS called Apple iTunes Server, but it's more like accessing a library on another Mac. It shows up on the left sidebar in your iTunes as a shared library, but you cannot administer it, only play from it.
There is a free download app for your NAS that works similarly called ReadyDLNA or Squeeze Center, but they are a bit clunky. For the most part, I just use the one iTunes as the content manager, and the use AirPlay to access the library from my Apple TV or iPad.
APPLE TV
This is highly effective when using the NAS with your iTunes Mac. You have to turn on Home Sharing in iTunes and then on Apple TV so they pair. Then your Mac, NAS and Apple TV must be on in order to play any content. Since my Mac, NASm and Apple TV are always on standby, it works well for me. I'm not sure of the aggregate power drain, but I keep all machines on a short standby leash to wake up when prompted. I've used the WiFi on the Apple TV with good results, but prefer a dedicated gigibit ethernet for optimal speed. This speed improvement is only realy evedent when updating your Apple TV's software. Otherwise, WiFi sufficient.
ONE LAST THING...
Be sure to periodically monitor your NAS drives for stability and health. I recently has a complete data loss on my NAS 1 when one drive failed and in the process of restriping a new drive, a second drive failed. Had I checked my SMART drive info more regularly, I could have anticipated the problem before it happened. There are tell tell signs, error counts, etc. you can look for.
Fortunately, I had the forethought to use a second NAS (NAS 2) to mirror the first NAS daily. So, once I installed the second new drive into NAS 1 and reformatted a new Volume, I was able to copy over all the content from NAS 2 back to NAS 1. I then has to reestablish the backup events on NAS 1 to resume the mirroring to NAS 2.
I now have a spare drive on hand to swap in immediately when I detect a possible drive malefunction/failure. It's not a matter of if it will fail, but a matter of when it will fail. I've replaced 3 drives in the past 3 years and will likely need to replace all of them as my NAS ages. My NAS 2 is strictly there to backup Nas 1 (think RAID 10) and is turned off in between backups. So far this has been a fullproof solution, but ideally I should move NAS 2 offsite for another layer of redundancy.