SIDSSP: Thank you for the easy to understand responses. Let me rephrase my last question - I don't think I was very clear.
My friend's library will consume well over 1TB of memory. My iMac has a 500GB capacity. Right now, all of my library (about 360 GB) is stored in the iMac memory AND on the Cavalry Ext. HD as a backup. When the new, bigger, library comes in, the iMac memory won't be able to handle it all so it will ALL go to the Drobo. Does this mean that when I play music that the Drobo will have to be on so that iTunes can access the music? (sounds like a really dumb question right now) If so, there would be no further point in keeping any music stored in the iMac internal HD, correct? IMac would, as you indicated, use only enough HD capacity to run iTunes and play the album.
Once the files are converted to aiff. presumably I could add the artwork and that also would be stored in the Drobo and be displayed via iTunes when an album is "called up" from the Drobo.