Data Migration Assistant vs. Time Machine

So I have a new imac coming on Monday, to replace our current imac.

What is my best bet for transferring in the most efficient way possible without losing data but without making the new machine not run efficiently.

If I pull from my latest time machine backup how does that impact the newer OSX version or any more upgraded applications on the new machine if I'm pulling from an exact copy?

My biggest concern is transferring my itunes since it has a lot of playlists, tens of thousands of songs, and hundreds of movies/tv shows in the library. This is on an external drive. For that as well whichever method I use, am I better off plugging the external into the new computer or keeping it in the old when I make the migration.

When you first turn on your new iMac it will ask you if you wish to transfer data from another Mac. Reply yes and attach your Time Machine backup drive and press OK to the prompt.

Important! Do not create an account on the new Mac. Your old account will be transferred to the new Mac along with all your data, iTunes library, applications, settings and so forth. The transfer will not overwrite any new system files.

I have done the above several times with new Macs and it's the easiest way to transfer data. Much easier and faster than using the Migration Assistant.

Not only do I agree with chscag, but offer an example from my oldest iMac. It came with Leopard installed. Since then, I have installed Snow Leopard and then Lion. In each case I used Time Machine in the way described by chscag and in each case the procedure went without a flaw. All preferences, settings, folders, libraries and so on became operational under the new OS.

With my newer iMac, I did exactly same when it arrived from Apple - the position you are in - and again it was flawless. I have to say that, despite this, I use a cloning app as a further backup and I independently backup all my iTunes, iPhoto, Aperture and iMovie libraries to EHDs. But then, I'm a bit obsessive about backups!

So, to answer your last question, use TM, but keep a copy of your iTunes on a EHD as you do now.

Ian