You do not need to convert your drive to NTFS from FAT32 for OneCare backup from a single PC to an external drive.
However, if you wish to do that, per the advice of OneCare, the more detailed instructions are here:
http://www.aumha.org/win5/a/ntfscvt.php
What the process is asking for is the confirmation of the name of the current disk volume you are converting.
In theory, converting the external drive will not harm the data, but if there is critical data on that drive that you do not want to lose, copy it to another location before running the convert command.
-steve