Need help setting up external hard drive for FCE project

Hi folks,
Basically I am looking at making a 20-30 minute video this summer of my motocross adventures and what not and have equipped myself with an iMac (2.93 GHZ Core2Duo 640GB 4GB) and of course, FCE. I have tried smaller projects before (ranging in length between 20 seconds to upwards of a few minutes) but have noticed an overall decline in computer speed which I am under the impression is being caused by the 10s of GBs of video project files and what not that seem to be scrawled away within my computer. Before I made any videos, my computer was sitting around 560 GBs of free space. Since making maybe 3-4 videos (50/50 iMovie and FCE) its down below 400GBs. I'm not sure whether it's the raw video files or the projects themselves that are so large, but it's slightly frustrating. Is there any sort of software (either third party or apple) that can look at your hard drive and tell you exactly where all the biggest files are? I'll post this question in the iMac forum as I realize this is for FCE, but I thought if anyone knew of one it would be extremely helpful.
Anyways, I have a SimpleDrive 320GB external HD that I plan to use as my external for making this project within FCE and would like some help in terms of how to set it up with FCE, what are the best settings etc. It is currently formatted with Windows, so I will also need help in setting it up for a Mac. I do have about 120GBs used on it already and was also wondering if I could keep this when re-formatting, but I'm pretty sure I already know the answer to that.
Sorry for the long-winded post; any information on this or something related would be fantastic. Thanks.

Yes, you can use your external HD with FCE ... provided it is formatted as +Mac OS Extended+ and is connected via FireWire.
You will need to back up any data that is on the drive that you want to keep. Before reformatting it. Formatting erases everything that is on the drive.
Use Disk Utility (located in your +Applications > Utilities+ folder) to format the drive.
After formatting the drive, go into +FCE > System Settings+ and change your FCE scratch disk location to the external drive.

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