Unless you are configuring Centralized backup to use that drive for backing up multiple computers to a Hub PC, ignore the suggestion to convert the drive. If you are using the drive for Centralized backup, then convert it externally from OneCare.
http://support.microsoft.com/kb/307881
If you are configuring backup for one PC and have chosen the "recommended" setting for Centralized Backup (all PCs), g back and uncheck that option and configure backup for your PC only and you won't need to change the drive format.
Note that converting to NTFS may cause a loss of data on the drive, if it has data on it.
-steve