I found out myself.
Deselect the following options:
Yes, exactly.
Then from there on in copy your album into the desired folder on the desired drive and drag into iTunes. When moved it automatically updates the file path.
There's a bit more to consider here.
First, there's your iTunes library file, which is typically in a path like:
~/Music/iTunes Libraries/iTunes Mac/iTunes Library.xml
I recommend you leave that located where it is, on your internal drive. Here's why: If you put your library file on the external and the external isn't mounted at the time you launch iTunes, iTunes will create a new library on the internal drive. Then you have to mount the external drive, close iTunes and relaunch it, holding the option key to select the library on the external drive. Big PITA. So leave the iTunes library on the internal drive.
The second item is your iTunes Media folder. If you point that to the external drive and launch iTunes without the drive connected, iTunes will create a new Media folder on your internal drive. Then you have to go to preferences after the external drive is mounted and change the Media folder back to the external. Another big PITA. So leave your iTunes Media folder pointed to your internal drive.
Finally, there is your collection of music files. They can be in any location you like. Just remember that for any files on an external drive, if that drive isn't mounted at the time you launch iTunes, iTunes won't be able to find them.
So here's how mine works. My library and Media folder are both on my internal, with my favorite music in my Media folder. The rest of my music is on an external drive in one folder, with sub-folders. When I'm on the road and launch iTunes, all my music shows in my library, so I know what I have, but the files located on the external drive get the exclamation mark (!), indicating iTunes can't find that file. I play whatever I want on the internal. When the external drive is available, I launch iTunes and it finds everything.
I know that's a lot, but I hope it helps!
I won't trust my music to iCloud and it wouldn't hold it all, anyway.
