Itunes Library .itl file in one folder, music in another Itunes makes no sense!

Question

A while ago I attempted to move one of my libraries to another folder to try to force Itunes to orginise my files in a way that makes sense.   Older versions of itunes apparently used a Music folder and the new one doesn't (or is it the other way around).  So I end up with some files in The Beatles/ItunesMedia/Music/Beatles and other files in Itunes The Beatles/Itunes Mediia/Beatles.  
I wanted to force Itunes to re-orginize all of the files under which ever system is newer.  I read up and was happy to find tha Itunes had a command to re-orginize and/or consolidate the files.   BUT carrying out this process turned out to be baffling.   It is very unclear what exactly these commands do and how to use them.
So now I have one folder called The Beatles and another folder called The Beatles ALL.   My .itl file is in The Beatles and all my music is in folders in The Beatles All/
I tried to fix this and saw some really strange behavior.   When I open my Library and play a song, that song is moved to ANOTHER folder next to the Music folder.   So now I have my itl file in one folder, most of my music in another folder, and two songs in this new folder that itunes just created.   I'm guessing that everytime I play a song itunes will move it to the new folder (Why?)
If you don't use separate Libraries please don't ask me why I am using separate Libraries.    I have a LOT of Beatles music that is more of a historical collection and I need to keep it separate from the Library of albums that I actually listen too.
To me itunes behavior is crazy.   Can some one explain it in a way that will make me slap my forehead and say "of course...it makes so much sense!"?   or is it just as bizzare and random as I think?  
Another approach that I considered was just creating a new library and importing all of those songs.  But I believe I would lose all of my playlists and I have my beatles collection extensively orginized by playlists.
Help appreciated.
Mike

Answer 1

This is an overview of how your library ought to be organized and how you might get it there. I can give specific instructions if you provide more details such as the full locations of the folders you mentioned earlier.
Make a split library portable
Here are the typical layouts for the iTunes folders:
In the layout above, with the media folder (everything in the red box) inside the library folder, the library is considered to be portable. A portable library can be moved from one path to another without breaking the links between the library and the media, and being self-contained is much easier to backup (You do backup, don't you?).
You can rearrange things to make a split library portable by taking a number of small steps which don't break the library.
Before you start any media files that are outside of the media folder will need to be consolidated (File > Library > Organize Library > Consolidate Files). If the library is in the old style layout then it should be upgraded to iTunes Media Organization (File > Library > Organize Library > Rearrange files in the folder <Media Folder>) to ensure that iPod Games, Mobile Applications etc. are brought inside the media folder.
The basic non-fatal manipulations are:
You can connect to an alternate set of library files by holding down Shift (Win) or Option (Mac) when starting iTunes.
You can move the library files to a new location as long as the media stays put.
You can move the library files and the media together if the media folder is a direct subfolder of the library folder.
If you have already moved/copied the media content from a subfolder of the library folder to a different location then you only need to copy the library files for it to appear as if you have moved the entire library in the way allowed above. I.e. just copy the library files into the parent folder of the media folder.
You can rename the media folder to iTunes Media (if it isn't already) if the media folder is inside the library folder.
iTunes (prior to iTunes 11) uses the name of the folder holding the library files as the window title. Having made a library "portable" you may need to take a final step of renaming the library folder to iTunes or, if the library files have ended up at the root of a drive, moving all of the library files and content folders into a new folder called iTunes.
After each change you need to open, test and close the relevant library before attempting another change. If a change broke the library, undo it or revert to using the previous set of library files.
In essence all you need to do to make your library portable is copy the library files into the parent folder of the media folder on the external/secondary drive and use the hold-down-shift/option-when-starting-iTunes method to connect to it. Other manipulations may be required to normalize the library so that the library and media folders have standard names.
tt2