Importing VHS into Imovie - file size question

Hi,
The novice is back so bear with me please.
I'm using the Canopus ADVC-55 to import a 2 hour VHS into imovie so that I can convert it to DVD in iDVD. However, the file size is so massive that its eating up my hard drive. If I get an external hard drive, can I move the imovie project I'm working on to the external drive and will I still be able to use the imovie application even if the actual application is on the main hard drive? I just figure because of file limitations when working with digital files on my hard drive, it might be more practical to get a 200gig external but I want to make sure that I can still use the imovie application from it.
Thanks.

Leslie,
If you do get an external drive, make sure it's formatted Mac OS Extended or it may not work properly with iMovie.
http://docs.info.apple.com/article.html?artnum=93296
Matt

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