OK, here's what I do, that works like a charm. Please note that these instructions are only if you want to start a brand new iTunes library from scratch, not move an existing one. I'm sure you can modify these instructions for an existing library, but I take no responsibility if you delete all your music:
I have an external hard drive, and I have a volume on it for my music library. The path to that is /Volumes/External/Music (or External:Music: in iTunes). In the iTunes preferences, I have that set as my music folder. I also have Keep iTunes Music folder organized checked, as well as Copy files to iTunes folder when adding to library (that last one's optional, but I recommend it to keep everything tidy).
Now, of course, the problem here is that the library and metadata files are still on your boot drive in your home directory, and if the metadata such as ratings, artwork and playlists are important to you, and your boot drive craps out, you lose all that, right? Well, here's how I took care of that. Delete, yes, I said delete the music folder in your home directory (~/Music). (Of course, make sure it's empty or that nothing you want to keep is in there, because it will go bye-bye) Move to trash and empty the trash, otherwise, this may not work. Now, in your home directory, create an alias called "Music" that points to the Music folder on your external hard drive. Launch iTunes. It will now create a new library file in /Volumes/External/Music/iTunes where the library and metadata will be stored.
The beauty of this? I can share my library between my iMac and PowerBook. They both have the alias created. Right now, the HD is plugged into my iMac. But if I plug it into the PowerBook instead and launch iTunes, my same library is there. And if I ever do an erase and reinstall of OSX, all I need to do is just recreate that alias and my library is still there with everything in tact. Plus, with all the time I've spent creating playlists and rating stuff and whatnot, I'd hate to lose that. My library file gets mirrored across 2 hard drives just like the actual music files do since I have the OWC RAID1 external drive thingy.
So bilbo155, while this will not get the iTunes app itself onto your external, it will move everything else over there. So as long as your external drive isn't connected, there won't be any trace of the music on your laptop. And if your boss gives you crap about the iTunes app being on your computer, just tell him it's a part of the standard OSX install
The only downside to this is that the external drive must be turned on and mounted otherwise iTunes won't even launch, it'll just give you an error and quit. So if the drive isn't connected, you won't be able to launch iTunes to browse the iTMS or listen to streaming audio or whatever. Not an issue for me since my external is always on
FYI....a similar trick with aliases and the Movies directory can be done to get movies stored on your external drive to show up in FrontRow