I'd like to reclaim the many GBs that this directory is currently eating up. Any reason I shouldn't symlink it to an external drive?
Judging from some quick tests I ran, you should be fine. iTunes finds the symlinked folder without problems (not given, as it has – or maybe had – bugs following symlinks inside its media folder) – the worst that happens is iTunes showing no backups when the link destination (i.e. the external drive) is not available.