So I just bought a 1TB external HDD for my PS3 and spent about an hour messing with it wondering why it wasn't working with my PS3. I then found out that it had to be formatted to FAT32. After another hour of bellyaching I figured out a way that wouldn't have taken me more than 5 minutes if I knew any better.

So I thought I'd share with you the simplest way to format your external HDD to Fat32. I have Windows Vista by the way, but that shouldn't matter.

Step 1: Connect your HDD to your computer and check to make sure that your computer recognizes it.

Step 2: Go to the start menu and in the command prompt type "cmd" don't type the quotation marks and then press enter.

Step 3: Then, type "format /FS:FAT32 G:" again don't type the quotation marks, press enter.

Step 4: Now you have done all that you can, wait a few minutes while windows formats the HDD to FAT32.

Step 5: Finally, hook up the external HDD to the PS3 and you are good to go.

I thought I should make this thread because I was making it a lot harder than it needed to be, I hope you find this helpful.

Yeah, most HDD's come stock formatted in NTFS (New Technology File System), which is the file format WIndows has used since NT.  As such, it's a Microsoft trademarked (copyrighted??) format, and not something Sony can use freely. 

An easier way...

Right Click - My Computer > Manage > Disk Management

A nice simple GUI that allows you to modify and format partitions.