I found this in the Apple Forum if you think it might help:
Restoring "damaged" iTunes library file
Mar 28, 2008 1:50 AM (in response to ideapower)
RELAX -- i was able to restore my iTunes Library to work again without any changes or loss. -- see below for what i did, here's how it happened...
...when my ext HD was accidentally disconnected while running itunes, the app froze. I reconnected the HD and restarted itunes. A dialog box saying something like importing data came up and it stayed for a long period and i could see it was working the HD. i probabably should have let it run until it was done, but i pressed the stop option after 5 minutes because i thought it might be hung up. Seems all the HD jogging meant it was rebuilding the 160 Gb library -- who knew?
anyway, i guess the app was trying to do an automatic restoration process (we need to communicate better, iTunes...) The aborted process created a new library file that had only about a quarter of my music and no playlists, which obviously is not OK at all, so i came to this discussion for some clues...I saw a lot of discussion about reloading everything which seemed kinda wack, and was not an option so i pieced together some bits of best answers.
What worked for me was:
1.Quit iTunes.
2. Copy the largest, most recent library from the "Previous itunes library" folder to desktop. It will have a date appended to its name.
3. New default iTunes library and iTunes Library.xml files are created in the iTunes folder if you restarted iTunes when it couldn't read your preferred library. The itunes library file has an itunes logo on it and the iTunes Library.xml file is a text document. Trash these two new files. Don't bother with other Library files in sub-folders, because just the two top level Library files are read by the app.
4. Drag the library file from the desktop back into the iTunes Music folder. The file should be renamed just "iTunes Library" -- Don't worry about not adding a replacement iTunes Library.xml file - a new one will automatically regenerate if the iTunes Library can be read.
5. Start iTunes and ta-da...Hopefully that'll do it. Do something to celebrate, I was so stoked i signed up for this discussion to share what worked for me... Help a neighbor, or do something nice...