I quit iTunes, moved the .plist file, restarted iTunes, and like you said.. it prompted me with all those questions you get when you run it for the first time ("Do you want iTunes to look for music in your Home folder?" to which I said "no", and "Do you want iTunes to keep your Music folder organized?" to which I said "yes", etc.).
All my playlists and songs were still there. The only problem I saw was that after iTunes updated my songs (presumably because I answered "yes" to the second question above), hundreds of little exclamation points showed up next to most of my songs (the one that means "file not found"). I suspect this might be because much of my library's contents are located on an external hard drive.
I started over, deleting the file again and this time clicking "Cancel" as soon as the first "welcome window" appeared. The update step was skipped, and everything else looked normal (except for the presence of the annoying ministore panel which I have always had minimized...). But even though none of the exclamation points were there initially, as soon as i tried to play any that had had them in my last attempt, they would come up "file not found".
So if i'm right, I have two options: keep the fresh .plist file and enjoy deletion confirmation to my heart's content... or replace the old one and be back where I started. I tried this last and found that all my old preferences were there (boo!) but it had no problem locating all my songs (yay!).
Any ideas?