Thanks, Zeb,
I've left it as it is, i.e. a 40gb drive formatted FAT32, and working, with no apparent problems.
As I said previously, the drive wouldn't install XP following several attempts, on either my friend's 4 year old machine, or my relatively new machine, with new cables, trying to format it NTFS.
I think it's one of those problems that isn't going to have a logical answer.