Yeah I'm gonna backup the data regardless. I'm using Windows 7 Ultimate 64-bit
So I right click and Format I've done that with other drives before, and then it'll let me choose NTFS from there..?
Yes, you will have the option to choose the file system. NTFS should be the default. If not, select it. If you have any file in use at the time, it may ask you to dismount the drive first. Just tell it to allow it to do so.
You will gain more than you lose. The only real important thing you will lose (perhaps) is if you move this drive around on different systems. Like I said, lot's of OS's can read.write fat32. You could install linux on your computer and it will still be able to read your current files. You can disconnect your drive from your PC and hook it to a Mac and it will be able to read your files. This is why most flash drives come formatted fat32.
If this drive will never leave your system or you will always use Winows as your OS, then you will lose nothing by going to NTFS.
You will gain the ability to set permissions on files when using NTFS. NTFS allows for secondary file streams (meta data). NTFS is a journaling file system so it's harder to corrupt the data than fat32.