Trying to set up library, new to OSX.

I do exactly what you're trying to get done. My media library is stored on an external HDD attached directly to my Mac Mini HTPC yet I sync all of my iDevices on another Mac in the house. Short answer--just point your iTunes library on your iMac to the external HDD--just make sure you have file sharing enabled.

I have the external HDD mounted automatically at startup (Systems Preferences > Users and Groups > Login Items -- just add it here). Also, you'll want to make sure the Copy files to iTunes Media when adding to library box in the Advanced sections of your iTunes Preferences is not checked.

There may be a way to have your library automatically updated when you add something to it--I manually add new additions (DVD and blu-ray rips, CD rips) to both--easily done by comparing libraries on my two computers using the Show Items Not In My Library feature (drop down box in lower left corned of iTunes when you select a Shared library from the left column). I know you can set it up to have any iTunes purchased media automatically added to all of your libraries (Settings box on lower right corner of iTunes when you select a shared library).