I have set up my external HDD this way. it is really easy, all you have to do is;
Open iPhoto, and click on the top menu called "iPhoto" between the "File" menu and the "Apple" logo menu --> go to "Preferences" --> go to the "Advanced" tab, and uncheck the box the says "Importing - Copy items to the iPhoto library"
This way you won;t have to create a second library on your external HDD. What it actually does is, it will reference any pictures you import to iPhoto, it will continue to create the file structure under the iPhoto library without copying the photos, it will just create a shortcut. You can have any folder structure in your external drive. The only thing I found to be a problem or more of a waste of time is, every time I add pictures to a folder ex; "Xevent 2009" to my external drive, I have to import the file added on external drive to iPhoto. iPhoto doesn't seem to have an automatic feature like Picasa by Google that reads any added files and displays them right away, without having to import.
Anyways hope this helps, it's helped me keep my iMac desktop running clean and fast while everything like pictures, music, videos, etc are organized any way I want on my external drive.