No you don't lose anything because your library AND your music are all intact. Be cautious you don't disassociate them or you will have some trouble. // Shout-out: So here you folks have advised moving the entire iTunes folder, are you all finding that works well as opposed to moving just the iTunes Music Folder? What happens to you if you launch iTunes when your ext HD isn't mounted? //

OK DJ by 'automatic playlist' I think they are referring to smart playlists. This is definitely something YOU NEED, in conjunction with knowing how to create groupings and edit/add genres.

Select a song or a group of songs, Command-I (ctrl for pc users) Now see genre and grouping, a grouping is a group of your own design. Genres are pre-made, but may not be comprehensive or specific enough. Think, classical music, or rock, these are genres, but these genres might include holiday music. So you might have a christmas grouping. The genre remains accurate, and you have now a classification that adds more refinement for the file.

Next comes the reason for such classification. iTunes: File>New Smart Playlist.
Now play with this till you get the hang of it. Consider a playlist that will automatically contain your classical music, excluding the christmas grouping. That way you can listen to classical music with out the estranged good king wenseslas in August.