How do I run iTunes off an external hard drive?

I have an 80GB laptop which is getting pretty full, so I've added a 500GB external hard drive with the intention of transferring my music files (amongst other things) to the external drive, freeing up space on the laptop. This has proved (almost) more trouble than it's worth...
Initially I simply copied iTunes over to the external drive using Windows Explorer. Surfing the apple discussions, however, convinced me that I ought to do the "consolidate library" thing as well (which resulted in me duplicating the files on the external drive). Finally sorted that out, deleted the music files on the hard drive, and discovered that my music library was allegedly "empty". Further surfing on apple discussions made me decide to copy the various iTunes library files from the main iTunes folder back to the hard drive. This has resulted in iTunes being unable to open, due to an "unknown error".
I'm ready to give up! Anyone out there successfully running iTunes off their external drive? How do you do it?

Follow up: My next move was to copy my iTunes folder back onto the hard drive. I had only been doing this for ten minutes (the process took twelve hours the previous time I did it) when iTunes was up and running again, and indeed "seeing" all my music files on the external drive. I cancelled the copy process, deleted all the newly copied iTunes music files from the hard drive, leaving all other files intact, and everything seems fine. The problem is now solved, but I'd nevertheless be grateful if someone could explain to me what was going on!
Thanks
Ian

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