Just got ext HD and want to use Time Machine; questions first

I finally purchased an ext. HD with enough capacity to actually start using TM. My question is, the main reason for getting it was to back up media, mainly videos and such, things that I'd have quick access to. So, my question is, is okay to partition the drive? And if so, about how much should I allot to it? The drive is an Iomega ego and is 320GB. My iMac is a 250 GB HD with only about 100 GB's used.
Also, when I first plugged in the Iomega, it automatically took me to a Time Machine screen asking me if I wanted to use this drive for TM. I guess it's formatted for mac right out of the box. Should I click yes on this? Will it allow me to format after the fact? OR, do I need to hit "cancel" and then go into Disk Utility and set up my partition?
Many thanks. I know this is probably pretty rudimentary, but it's my first time using Time Machine.

Yes it's OK to partition a backup drive in order to use part of it for storage and the other part for TM backups. But your external drive is not large enough for both. A TM backup volume should be at least twice the capacity of the drive it backs up. In your case that means the TM volume should be at least 500 GBs to back up a 250 GB drive (it's really less important how much space is currently used then how much space could eventually be used.)
If I were you I would get a second larger external drive for TM backups. Or adopt a different backup strategy that does not involve using TM such as a simple cloned backup that you update periodically with backup software. This would only require a 250 GB volume on your external drive leaving about 70 GBs of a storage partition.
For backups you could use one of the following:
Backup Software Recommendations
1. Retrospect Desktop (Commercial)
2. Synchronize! Pro X (Commercial)
3. Synk (Backup, Standard, or Pro)
4. Deja Vu (Shareware)
5. Carbon Copy Cloner (Donationware)
6. SuperDuper! (Commercial)
7. Intego Personal Backup (Commercial)
8. Data Backup (Commercial)
9. SilverKeeper 2.0 (Freeware)
10. MimMac (Commercial)
11. Tri-Backup (Commercial)
Visit The XLab FAQs and read the FAQ on backup and restore. Also read How to Back Up and Restore Your Files.

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