Does it matter how it's formatted? You should be able to reformat it prior to use in pretty much any OS of choice. Of course, I speak as one who has never used a pre-assembled external HDD before, so I don't know if industry practice actually condones (or even managed to pull off) something as ridiculous as prevent one from reformatting a pre-built external drive...

If you don't get an NTFS option in the Format dialog box, then either the firmware for the IDE/SATA-USB adapter is total crap, or you're trying to format a thumb drive.
a few people also sugested just buying a HD/case and hooking it up... doesn't that defeat the purpouse of just hooking it up via USB? Not sure how that would work with an ATA hookup or something
Not really. The externals you use are the same thing anyway; a hard drive hooked up to a SATA-USB or IDE-USB adapter, and put in an enclosure. They essentially look like this on the inside:


Inside, the hard drive plugs in to an IDE/SATA connector. Outside, you usually get a USB connection, and in some cases eSATA and/or Firewire as well. Just like with a pre-built external. That particular enclosure is a Vantec NexStar, accepts both IDE and SATA drives (IDE connection shown in upper image, SATA in lower image). I described it in
more detail in this post.
My personal preference is for enclosures like this:

Not the prettiest solution, but you get much better cooling for your drives

and much more convenience, too.
As for Seagate, their drives are pretty alright (the internal drives, I make no comment on their enclosure design). The Barracuda series is a good performer, and if not for their somewhat recent firmware scare (from their
Knowledgebase, or just google "
seagate firmware issue") I'd say they're not too bad. But AFAIK the newer batches of drives should have the firmware issue resolved already (you should do your own googling to confirm this though).
More info here.
I have 4 Seagates (the supposedly ill-fated 1TB Barracuda 11s) running in my NAS, 1 died within a year and got repaired under warranty; replaced it with a 1TB WD Caviar Green, and the repaired Seagate is now sitting as a spare. The other 3 are still running fine, so if there's any sort of hardware issue I'd say it is not an easily reproducible one. They're mounted in RAID 5 so they should see equal usage; I doubt the drive failure is due to overworking of one drive alone. There are no clicky sounds from the Barracudas just yet, and with cooling from a 80mm fan in the NAS they run at about 41 deg C (105 F).
I agree that Maxtors are crap, but I wouldn't carry their reputation over to Seagate just because Seagate bought them over (I have no idea why Seagate would do that too...) They may be under the same upper management, but that does not necessarily mean their manufacturing processes are the same.
Once again, I emphasise that service support and warranty should be your primary considerations for an
external drive (one you don't plan on assembling yourself). Since these are devices you cannot open up without voiding the warranty, it is essential that if they do break down (and there is always a chance they will, no matter how well-reupted the drive), you can get a replacement ASAP without having to do any drive-swapping yourself. If after 2 or more replacements the drive still dies within the warranty period, it's a crap drive. Otherwise, you probably are just unlucky (or live in a hot and humid place).
On a final note, here's an
interesting study on hard drive failures by Google. In particular, note the definition of MTBF, and how it says nothing about how likely your drive will fail. Also, it seems temperature (>40C) has less of an effect than I thought, but it is still noticeable.
[edit] An interesting (and witty)
response from NetApp to Google's study

If you're lost at this point, feel free to stop; you're perfectly fine without knowing all this.