I have had an old 500GB USB disk sitting around, that I used for manual backups in pre-Time Machine times, back when I deemed FAT32 to be the comfy file system choice for hooking up a disk with any computer I might want to reach it from. Today, I think that sweet spot is NTFS.
Especially as Time Machine doesn't want anything to do with FAT32 devices as backup targets.
I figured the easiest way to convert the filesystem in place (as I didn't have any other disk around) was to boot up a Windows XP virtual machine in Parallels and let Windows do it.
That procedure was perilous. If you ever embark on doing it yourself, here is how you probably want to do it:
> net stop wuauserv
The Automatic Updates service is stopping....
The Automatic Updates service was stopped successfully.
> convert E: /fs:ntfs
The type of the file system is FAT32.
Enter current volume label for drive E: [...]
> net start wuauserv
The Automatic Updates service is starting.
The Automatic Updates service was started successfully.
If you skip that first step, you are wise to remember that a Windows machine needs baby sitting not to do bad things to itself. Like deciding it has found and applied security updates that it really wants to restart to complete in ten, nine, eight, ...all the while that long file system conversion pass is humming about in the background.