well.. you install the software to the internal HD... you have to install the software to the HD that your OS is running on. you can put all your mp3's on the external and use them with SSL fine

I've heard about sound quality issues with the last update. When i install the software does the newest version automatically download

I have a G4 iBook as well. It runs beautifully. I also have a firewire external. Just put all your music in your external. My understanding is that with the newest version of iTunes you can have multiple music libraries. For instance, you could have one with music from your external and another one with music from your internal. But, I don't know much about it since I really don't have use for it. Use the search box to locate that info if you need it. Someone already explained how to do that.

SSL never gets upgraded automatically. I don't have any sound issues with the latest release (not the beta).

i run serato on my G4 12 inch powerbook, it's kinda like the ibook i guess. i can't think of a better laptop to run it on.