Photo library on external network drive
There are two main options which I would go for:


Put your library and contents on a network volume

This is the option that I went for on my setup, mainly because I did not consider the second option at that point in time. This option works fine for me — even when the network drops (which is pretty rare): the data transfer pauses and continues when the network reconnects.

This works fine for my relatively large Aperture library, but I see no reason for this not to work in iPhoto.

✓ Easy to set up, just copy your entire library to a network drive and ⌥-launch iPhoto
✓ Uses no space on your local machine
✗ Possibly susceptible to network dropouts causing problems
Put your library on your local machine and the contents on a network volume

This alternative is probably better, but requires that you switch to Aperture. This way, you keep the library on your local machine but the media is stored on a network drive. This means that it uses very little space on your local machine but even if the network drops there is no chance of corruption/etc.

✓ Much less likely to have problems due to network dropouts
✓ Uses very little space on your local machine
✗ Does use some space on your local machine
✗ Harder to set up — not as simple as just copying your entire library