Moving the iPhoto library is safe and simple - quit iPhoto and drag the iPhoto library intact as a single entity to the external drive - depress the option key and launch iPhoto using the "select library" option to point to the new location on the external drive - fully test it and then trash the old library on the internal drive (test one more time prior to emptying the trash)
And be sure that the External drive is formatted Mac OS extended (journaled) (iPhoto does not work with drives with other formats) and that it is always available prior to launching iPhoto
And backup soon and often - having your iPhoto library on an external drive is not a backup and if you are using Time Machine you need to check and be sure that TM is backing up your external drive
is there a way to use the external hdd as a both a backup and the main place for my pics?
No because that's not a back up. If the disk is damaged or faulty what do you have? You need the library backed up to another disk at least.
My Library lives on my iMac. It’s Backed up to two external hard disks every day. These disks are permanently attached to the iMac. These back ups run automatically. One is done by Time Machine, one is a bootable back up done by SuperDuper
It’s also backed up to a portable hard disk when ever new photos are added. This hard disk lives in my car. For security, this disk is password protected.
I have a second off-site back up at a relative’s house across town. That’s updated every 3 or 4 months.
My Photos are backed up online. There are many options: Flickr, Picasa, SmugMug etc. However, check the terms of your account carefully. While most sites have free uploading, you will often find that these uploads are limited in terms of the file size or the bandwidth you can use per month. For access that allows you to upload full size pics with no restrictions you may need to pay.
Every couple of months I test the back ups to make sure they are working correctly. It’s very easy to mis-configure a back up application, and the only way to protect against that is to do a trial restore.