Folder for each artist in Hard drive?

Are they not in a parent folder? If not, you should be able to create a new folder and then drag all your artist folders into that one. For example, the folder might be called iTunes and it would contain the individual artist folders (this is how my drive is set up). Then using the iTunes application, go to File > Add folder to Library. I use a PC so it may be slightly different on a Mac.

Since you changed the location of your iTunes source you will need to repeat the process of adding your music to your iTunes library. Assuming all your music is now on your external drive, I would delete your entire iTunes library while making sure that you don't delete the original files in the process. This will ensure there are no duplicate files showing up in iTunes after you re-add your music from the external drive. Next, check the "Keep iTunes media files organized" box in your Preferences pane and then go to: iTunes > File > Add to Library. Select all the music folders on your external drive and hit OK. Depending on how much music you have, the process should take between 5-30 minutes or so.