I wanted to give an update to this thread since I was able to give all of this a try. The steps I followed was:
1) I had all of iTunes running off of an external HD, the library and everything.
2) I made a copy of that HD to another external HD using Synkron, so I could do incremental back-ups
3) I changed where my newly ripped music would be stored at under iTunes Preference, pointing to the appropriate folder on that new HD
4) I dismounted the original HD, brought up iTunes while holding down the Options key and chose the library on the HD with the iTunes copy.
Before iTunes came up it showed that new library paths were being rewritten. This took a very short period of time, then iTunes came up just fine on my other HD holding the iTunes copy. So it looks like I am good to go and now I have a better understanding of how all of this works. I am not sure if step #3 is necessary and I may give it a try skipping that step to see what happens.