storage options for MacBook Air

Haven't considered anything else since this setup mainly includes pieces that I already have which is the MB Air running iTunes connected to a Ultra Fi DAC-41 USB DAC. My files are all AIFF which is why I'm sticking with iTunes.
The question remains, do I keep my music on the external drive or copy music to the solid state drive of the MacBook? 

hgeifman,
The MB Pro you had probably did not have a SSD drive which I'm guessing is why the retailer recommended the external LaCie hard drive. I've read that it's always good to keep music on an external drive.
I've also read that SSD makes a noticeable improvement over standard hard drive and my MB Air comes with built in SSD which makes my decision difficult.

dbtom2
My library will fit in the MB Air at this point, but you're right 250 GB will run out when my library grows. What Mac are you using?
I control itunes using the remote app and it works very well, no need for two different computers.

Thank you for all the comments!
Looks like there's a lot of options and the Auralic units seems popular, this is something I'll have to look into a little later. I need to decide how much of a commitment I want to make to digital to shell out for a music server. I have so many sources to play with and have fun with all of them.
I'll setup what I have and add BitPerfect to see how it all sounds.

I have set it up with the music on an external HD and really pleased with what I'm hearing at this point, thank you!

Ghosthouse, I've installed BitPerfect. Thank you for the recommendation!