Transfer iTunes library and music to external hard drive
This is is how I have iTunes set up. Just go to iTunes->Preferences->Advanced and change the iTunes Media Folder location to the external disk. The iTunes library file will remain in ~/Music/iTunes and so you ca browse the titles and other metadata,

The one thing that I have found you need to be careful of is if the external disk is not mounted then don't add Podcasts or do much with ITunes as the program will reset the directory path if it can't find the external direve. However the paths to the music files will not be altered so it is only a long term issue,