How best to move user folder to a Mac Mini + external drive

I am streamlining my desktop computer setup. Whereas before I was using a PowerMac G5 as my primary desktop computer, I realize I am using my MacBook Pro more often, so in the interests of conserving space, I will be switching over to a Mac Mini connected to my AV system for hosting all my iTunes music, videos, media, photos, etc.
Here is where I need advice. My PowerMac has a lot more media on it than can fit on the internal hard drive of a Mac Mini. I have already secured a 1 TB external drive which will be permanently connected to the Mac Mini, but I am unsure as to how to best go about copying my data to it.
My initial thought was that I could move the iTunes music folder to the external drive using the library consolidation feature, and I could copy my iPhoto library to it, then point the respective applications to the new location. However, I want the external to act as my home folder where the OS looks for all my personal data, including movies, documents, etc.
I know there is a procedure for changing your home folder's location to an external drive, but because of the limited size of the Mac Mini's internal HD, I would like to use migration assistant when I first start using the Mac Mini. Should I hold off on moving the home folder until after I have migrated, or can it be done beforehand?
Anyone have any thoughts or ideas? Thanks!

Thanks for the procedure. It seems very easy, but I am wondering about the consequences depending on when I do it. For example, let's say I first copy my entire home folder to the 1 TB external drive, set up the PowerMac to use it as my home folder, then use migration assistant to import my user accounts, applications, and settings onto the Mac Mini. Will it try to extract the data from the external drive onto the Mac Mini's internal drive? There won't be enough room for everything.
As an alternative, I can move my iTunes library and iPhoto library onto the 1 TB external first, keeping the rest of my user data in its original location. Then it can fit on the Mac Mini, and I can do the migration, then move the home folder to the 1TB external once it's all up and running on the new computer.
Which will work best?
I had heard about people using a single drive as their home folder across multiple computers, but that is not the case for me. My MacBook Pro will become my primary computer, but I intend to keep it clear of media, whereas the MacMini will become my media server for my AV system in my living room. The 1 TB will be constantly connected to the Mac Mini, so there shouldnt be a problem with starting it up once the user folder location has been moved.

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