Do you really mean library file? As in iTunes Library.itl or iTunes Music Library.xml? If so, that's your problem.
iTunes Library.itl and iTunes Music Library.xml are catalog lists. Neither is your actual library, they are documents located within the library. That's why they're grayed-out when you try to open then with iTunes.
To open an iTunes Library (whether on an internal or external drive), iTunes needs to know the location of the iTunes Media folder (the set of nested folders that actually contains the media files).
If you copied only the iTunes Library file to the external HD, and not the iTunes library folders, then what you describe is completely understandable.