This is what I did to move files, I'm not sure if its the best way and I'm not sure if it'll work the same on Panther. But it's worked in OSX and Windows version of iTunes 6(maybe 5 I'm not sure) and later.
Make sures OSX sees the drive
Open iTunes
Go to File-->Preferneces
Go to the Advanced Tab
There should be near the top a iTunes Music Folder Location , hit the Change button.
Direct it to the external HD and then hit ok on the bottom.
Then go to Advanced-->Consolidate Library
A warning box should come up and hit consolidate library and it'll go.
Remember to plugin your drive when u open iTunes, somewhat randomly iTunes will realize songs aren't there and when then when your plugin in your drive and your just letting iTunes shuffle it'll skip over because it won't recheck them.