I keep my itunes library on my pny storedge- performance for music is fine, i don't use itunes for videos, and the only problem is the frequent disconnects, usually after sleeping. I do back up my library to an external and crashplan online storage, though.
I discovered the best way to use the StorEDGE for iTunes is to NOT MOVE the whole iTunes LIBRARY to it.
Instead:
1. Move the actual MUSIC folder in the iTunes Media folder to the StorEDGE (hold down the COMMAND key while dragging).
2. In iTunes->Preferences->Advanced UNCHECK the box that says "Copy files to iTunes Media folder when adding to library". (This way iTunes will "see" your music, and play it from wherever you stored it.)
3. If you haven't already, delete the songs you moved from the iTunes library window.
4. Add the songs back by clicking FILE->ADD TO LIBRARY, then navigate to the music folder now on the StorEDGE.
5. The iTunes window will repopulate with your music.
6. Create a new blank MUSIC folder in iTunes Media folder to replace the one you moved. This is where any future music purchases/CD rips will be stored by default.
Never had any disconnect problems with this method.