On my home PC, Office is only really installed for conveniences sake. You know, open that Word doc, bash up the odd spreadsheet or Access database. I don't work from home anymore and I'm the only user who is fairly technically literate. My email is gmail so I don't use Outlook.
Given the scenario above, I don't do anything particularly important Office, so I'm interested to hear if anyone here has tried out the Beta of Office 2010, and what they think of it.
Copy your library to the hard drive, change the preferences, and see if it works. But don't delete your local iTunes library until your sure everything is okay on the external drive. That's what I'd do.