How Do I use my External Drive for my iTunes Library without adding anything to my Mac's HD?

I have a new MBP and have transferred all of my music off my old pc (250+ gigs) to a Lacie 1TB thunderbolt external drive.  How do I use the external as my primary itunes library with out using any of my Mac's HD?  I'm new to mac so I have a few more questions...
1. The initial question above
2. will this work or will there be extra steps every time I disconnect and connect the external (other than ejecting)?
3. Will I be able to access it remotely / home sharing?
4.  Would this work with itunes match?
Thanks All  !!!

DevonC wrote:
I haven't set up Time Machine yet because it wants me to completely format my external hard drive, and it seems to want to use it for TM backups exclusively?
However, I would also like to use it to store stuff that I don't want to keep on my computer, eg tons of photos, videos, stuff from my sister's computer, etc.
Is there a way to do Time Machine but also use the external hard drive for storage? I don't mind temporarily copying the photos etc that are on there to my computer while I format, so that's not the issue. I just don't want my EHD rendered completely useless to everything else.
Thanks!!!
There are several ways to do exactly this.
If you partition the external drive, you can use one partition for TM and the other for anything else.
Even if you do not partition the drive, you can safely store other data in folders on the drive. Just to not use the folder that TM creates for anything. And it's best not to put files directly on the drive, in my opinion, but use folders for storage.
Just remember that whatever you put on the drive takes up room from TM and when the drive gets nearly full, TM will start automatically deleting older files from it's own folder.
I have my Tiger clone on my external TM drive in a separate partition and everything works fine.

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