Windows 7 - Reformat to fat32

Hi,
In need of some help with a situation here and am sick of trawling the internet for useless info. So here is my problem;
I have a WD 500GB My Passport external HDD that I would like to format to FAT32 so I can use it for back-up but more importantly so I can plug it into my PS3 and view all the downloaded movies I have.
I run windows 7 and have already tried to reformat using command prompt which did not work.
I then tried a Windows 7 GUI (Ridgecrop Consultants Ltd) which when I went to the drives properties appeared to have reformatted it to the correct FAT32, however after then waiting several hours and backing up all my data (inc video files) and plugging it into the PS3 the AVI files contained in folders where not there/not visible but the standalone avi/wma files can all be seen and played.
Am wondering if this is a PS3 fault or how it is formatted??
Please help, its doing my head in!! :S

Try using NTFS.
How to reformat PS3 hard drive | PlayStation® Community Forums

You could Check the hard drive with the manufacturer's diagnostic tools first.
Hard Drive Diagnostics Tools and Utilities (Storage) - TACKtech Corp.
HD Diagnostic