[ElDiabloConCaca]

I think more RAM would provide the biggest boost to your everyday computing tasks, including the responsiveness of iTunes (since iTunes does some fancy RAM caching for songs).

Your 1TB USB 2.0 drive may be fast, but USB itself is a processor hog and resource-hungry. While your internal drive may have a slower spindle speed, I think you would see much better transfer rates on your internal drive than your external, since it's natively connected to a SATA interface (and hence no USB-to-SATA translation). Still, I think exploring the RAM dilemma would be the first thing you should do.

Is your 1TB USB 2.0 drive a Western Digital Elements drive? The reason I ask is that those drives have automatic power-saving features, like a drive spin-down that occurs during periods of inactivity. These on-drive power-saving features are independent of Mac OS X's power-saving features, and cannot be controlled via the Mac OS X "Energy Saver" preference pane (meaning you cannot turn off the drive's spin-down function, no matter how hard you try). The delay in switching songs could be due to the system waiting for your external drive to spin back up... do you notice anything like this when using iTunes?