Duplicates
Apple's official advice is here... HT2905 - How to find and remove duplicate items in your iTunes library. It is a manual process and the article fails to explain some of the potential pitfalls such as lost ratings and playlist membership.
Use Shift > View > Show Exact Duplicate Items to display duplicates as this is normally a more useful selection. You need to manually select all but one of each group to remove. Sorting the list by Date Added may make it easier to select the appropriate tracks, however this works best when performed immediately after the dupes have been created. If you have multiple entries in iTunes connected to the same file on the hard drive then don't send to the recycle bin.
Use my DeDuper script if you're not sure, don't want to do it by hand, or want to preserve ratings, play counts and playlist membership. See this thread for background, this post for detailed instructions, and please take note of the warning to backup your library before deduping.
(If you don't see the menu bar press ALT to show it temporarily or CTRL+B to keep it displayed.)
The most recent version of the script can tidy dead links as long as there is at least one live duplicate to merge stats and playlist membership to. There are other ways to deal with deal links alone, but those won't preserve that information.
Library Structure
Ideally you want your entire library placed on a single drive. If the default location of <User's Music>\iTunes isn't good for you because of limited space on the system drive then I'd recommend you place your main iTunes folder at X:\iTunes where X: is a drive that has enough room for all of your media, set the media folder as X:\iTunes\iTunes Media, and then consolidate all content to this path. See this make a split library portable post for more details. Once the library is in a portable form it is much easier to backup.
tt2