Storage

You do not need to format the disk if you want to put it inside an external enclosure and connect via USB, Firewire or eSATA. Once you connect the drive to your running system, you can browse the directories. The only problem you might face are permission problems, which are resolved by taking ownership of the files. Google on how to do that should you encounter any problems.

For performance, eSATA is the prefered way to connect any external harddrive. USB is often limited to 20MB/s and has a higher latency and CPU overhead.

it would really come down to how it's connected to your computer. USB is slower than firewire and that one is slower than eSATA.

Yes.
Do a full Format; a quick format just adds directories and wipes data. A full format scans your entire drive for errors and bad sectors (and prevents writing to bad sectors).

I'd definitely leave your hard drive in the case if you can. Even the best USB devices only allow 32MB/second.

I highly recommend you use a new drive, the WD 1TB Black version. Partition it (when installing Vista) into 2 partitions. If you game a lot, maybe 300GB for the C-drive and the rest for D. Use a program like Acronis True Image to make a backup of your C-drive (Vista) to a 2nd hard drive (physically separate).

If you really need an external drive, invest the extra money in getting one with both USB and eSATA, then add an eSATA card (PCI or PCIe) and use the eSATA only.