How do I change the iTunes "source" folder?

You can do it by changing the media folder location in iTunes preferences but if you do it right now you'll end up with your old things on the internal drive and anything you start importing being put on the external drive. You'd be better off putting your whole library on the external drive by dragging the iTunes folder there, start iTunes with the option/alt key held down and select the library.itl file on the external drive. iTunes will now put everything on the external drive and keep it all in a tidy package in one location.

You can split it if you wish, but I bet you'll be back here with a load of problem questions when it comes time to move your library next. 😉

Set the option for the location of the iTunes Music folder to your external drive in the iTunes -> Advanced -> iTunes Music Folder location preference to the appropriate place on the external drive.

Note that this will only affect where future imports and purchases go. If you want to move your existing content there, the easiest way is to just drag the entire iTunes folder (the _entire_ folder, _not_ just the iTunes Music folder) to your desired location. Then hold down the Shift key while launching iTunes. You'll be given a dialog box where you can select the iTunes library you want to use. Navigate to and select the iTunes folder in it's new location. The your existing content will be on the external and all future imports and purchases will be stored there as well. This procedure assumes that all of your tracks are contained in the iTunes Music folder. If they're scattered around your volumes, moving them becomes much more complex.

Regards.