Firstly, i must point out that while i use Firefly, i don't use iTunes.
The first thing you'll have to do is update Firefly.
You can either install the .bin file that Infrant provide or switch to the beta firmware. You can find the link for the .bin file in http://www.infrant.com/forum/viewtopic.php?t=8587
If you use the .bin file the old web interface remains and if used will corrupt Firefly's config file.
The library file needs to be placed in the top level folder that firefly looks at for your music i.e. if Firefly is told c:/Music then that's where you put the library file.
To get a copy there you either manually copy it or write a script file to do it for you.
It would be nice if Apple put the library file in the same place as the library...
iTunes can handle the library being on a network drive but it refuses to put the library file there.