you can use NTFS as an external drive, as well. There is no need for it to be Fat32. Actually, NTFS allows you to use it for files larger than 4Gb (if I remember correctly the limit). Fat32 does not allow that.
I would try reformatting as NTFS, but again, after doing a low-level format (you can use Killdisk to achieve that). If you do the low-level first, it will show the whole drive capacity.
If you want to keep the Fat32, you can choose that after the low-level formatting, as well.