What is the best way to store my music library off my Mac?

I do not have enough space on my Mac for my music, so I need a new solution for storing my library and in a way so that I can sync with my old iPod.

Can I store it all on a NAS and have iTunes use that as its library? And how?

Is there a better way? Could I use iCloud for this or will iCloud simply sync the music to my Mac?

Thank you

Søren