As of yet I don't have an iPod but I or the other half is getting one soon. So I'm not sure about the iPod updating & also wondered about that same issue. I'd go for manually updating your iPod. Otherwise there wouldn't be an update iPod option in your iTunes I'd have thought. Xcuse me if I'm off the mark.
B: I just checked thru the iPod Tutorial & I think page 4 of the Tutorial answers your question about managing certain songs. Page 12 & 13 are interesting too. See:
http://www.apple.com/support/ipod/tutorial/index.html
A: As far as finding a new location for your iTunes library. I moved mine from my OSX partition to another 2nd internal HDD partition. I then consolidated the library (which moves all the folders to the new library location.) Go to iTunes Preferences>Advanced & select Change... & then select your external HDD. Then iTunes menu Advanced>Consolidate.