The above link assumes that you want to get rid of the Library on your Mac. I have Library on an external drive for big camcorder projects, but I've kept the one on my Mac for editing short iPhone/digital camera videos. You can open either, or both, from iMovie's File Menu>Open Library, where both Libraries will be listed.
In fact, having just looked to check the menu structure, you can create a New Library on your external drive from there as well, if you like.