My current hard drive (500 gb) right now is split into 2 different drives.  A C, which is about 150 gb, and a D, which is about the remaining 350.  I'm planning to buy a 1 TB external hard drive and would like to combine these 2 back into 1 drive.  the C drive has my windows stuff with all my programs and what not and the D drive has my music, movies, etc etc.  Is there a simple way to do this?
 
Also, I was planning to buy the Western Digital My Book but heard it comes in FAT32 i think it was.  From reading around, you can't store files bigger than like 4 GB on it and would need to format it to NTFS.  Is there a guide or something on how to do this?  Or will the external hard drive come with instructions on what to do?

FAT32 and NTFS are partitioning items, not formatting.  But once you set up a partition, you MUST format it before using, so they get confused.
 
I'd be surprised if a 1TB drive comes partitioned as FAT32, but maybe. If it does, you can change that immediately BEFORE you put any data on it.  However, watch out for something: the WD website says the unit will come with their software loaded, and it will run that automatically when it is plugged in.  If you partition and format, all that will be lost, so you'll have to copy it off and put it back afterwards!