Using iMovie to save project files to external hard drive?

I have a MacBook Pro with very limited space on the internal hard disk drive. I also have a few FireWire external hard drives.
A friend recently gave me his Hitachi DZ-HS300A mini-DVD camcorder so I could copy footage off of it, load it into my machine, edit it and upload it (several minutes) to YouTube. He can't do this because he lives in a remote area where there is no broadband yet.
I almost never use iMovie. I was wondering if there is a way to save the project file to an external FireWire drive so that there will be no large video files clogging up my laptop's internal hard drive. Can this be done? Is there an iMove preference I have to change?

You should generally leave the iMovie Project file on the boot drive. The Project File is mainly a small text file with in and out points.
The iMovie Event file is where the video assets are stored. You can store events to an external hard drive in two ways:
1) As you import from the camera, you will see an import screen. You can select the external drive on the import screen
2) If the event is already on your internal drive, you can click View/Events By Volume. Now you can drag and drop the event to the external drive in the Events SOurce List in iMovie.
For your external drive to be visible to iMovie, it must be formatted HFS+ or HFS+ (journalled).

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