If i use i-tunes can i store the whole the whole set-up on an external hard drive?

Answer 1

Yes. On iTunes go to 'Edit' then 'preferances', then on the 'advanced' tab is the 'general tab' -this shows where your itunes folder location is. So click on the change button and point it to the external hard drive. This is what I did..so it doesn't bog down my computer and is safer.
You still have to move your iTunes folder to the ex. hard drive so it can 'see' it....but I'm sure you knew that already.

Answer 2

Yep