Yes everything is stored in the music folder - back that up and you're good.
There are many things you can do to copy less than all of your songs to an iPod - you can select to copy only certain playlists, or you can uncheck specific songs you don't want copied over - it's really up to you.
The songs included in your library can be pretty much anywhere - using the "consolidate itunes library" command will copy everything to your default music folder, but leave the originals in place (so you might be able to save on disk space this way). Of course, if you turn off the "copy to music folder" option in preferences, then you can leave the music wherever you want and thereby split it among as many drives as you please.