What Jamscience was referring to is you can have multiple iTunes libraries, which you can switch between if you hold down the option key, click on the itunes icon, and don't let up on the option key until you see the dialog asking you which library you want to use.
That works fine if you want a different library for the files on your Mac's internal hard drive vs the files on your external drive. But to keep iTunes from copying those files, go to the iTunes menu, select Preferences, Advanced, General, and make sure that the "Copy files to iTunes Music Folder when adding to library" is unchecked. Now you can add the files on your external drive to the library and have it work with those files directly, rather than copying them locally.
I hope that helps.
Michael
