Q: How to Restore iTunes Library after update?

Updated iMac to iTunes 11.0.5 and lost almost entire library of music (all but 3 songs). Tried to open iTunes with previous library but music I downloaded from CD's cannot be "located". Don't know how to find them. Tried to restore from back up external drive library, but those files are "locked" or I don't have permission. Purchased songs, with some exceptions, will play. Some don't though.

My library was from an much older version of iTunes (2008 or 09), could that be an issue? I don't use this desktop much at all, but would like to have the library be functional.

1.  How can I restore my library getting all songs to play?

2.  Should I update iTunes on my Macbook? It's using 11.0.4 now. I don't want to mess up it's library as that's the one I use.