To have to format an huge hard drive using FAT32 as filesystem is a quite unusual requirement, unless you own a Sony Blu-Ray player (and possible others). While my TV is able to read a NTFS filesystem just fine, it does not reproduce DTS audio, and reencoding the video can take hours depending of your source file. Also, sometimes the TV (an LG 47″ Full HD TimeMachine model) drops frames if the video is very high-res (say, a 1920×1080 .MKV file with an high bitrate), which leds me to use the Blu-Ray player.
The only problem is that it does not read NTFS, only FAT32, so I had to convert my 1 TB hard drive first. In order to do that in Windows 7 (and possible other versions of Windows), it is necessary to appeal to third party tools due to the HD’s size. One of the simplest and fastest that I have found is fat32format, which does a pretty good job, handling drivers of up to 2 TB.
Note: Please bare in mind that while you can format a hard drive of up to 2 TB, FAT32 has a 4GB limit per file, and there is nothing you can to about it. If your files are bigger than 4GB, you will need to slipt them or move to NTFS.
fa32format is a free tool, available at http://www.ridgecrop.demon.co.uk/index.htm?fat32format.htm