Hello d.esk,
It is a common practice to store an iTunes library on an external drive. I have included articles on how to perform this task. I have link both the Mac and Windows versions of the article.
iTunes for Mac: Moving your iTunes Media folder
http://support.apple.com/kb/ht1449
If your hard drive is nearly full after you load your media into iTunes or you want to move your media files to another hard drive, follow these steps to move your media and keep your playlists, ratings, and play history.
iTunes for Windows: Moving your iTunes Media folder
http://support.apple.com/kb/HT1364
Thank you for contributing to Apple Support Communities.
Cheers,
BobbyD