I found this in a few different places around the 'net - hopefully it's helpful:

Format Backup Drives with NTFS

Are you planning to backup your computer data using the Automated System Recovery Wizard or Backup utility in Windows XP Professional?

Be sure the destination drive, on which you store the backup, is formatted with the NTFS file system. The FAT32 file system can store no more than 4 gigabytes in a file. That may not be large enough for a backup file that contains everything on your computer. The NTFS file system does not have the 4-GB limitation on file size.

To convert the destination drive to NTFS:

• Click Start, click Control Panel, click Performance and Maintenance, click Administrative Tools, and then double-click Computer Management.
• Click Disk Management.
• Right-click the volume (disk) you want to format (or reformat), and then click Format. Select the options you want, and then click OK.

To convert a volume to NTFS from the command prompt:

• Click Start, click Run, and then type: cmd
• Click OK.
• In the command prompt window, type: convert drive_letter: /fs:ntfs
  For example, typing convert D: /fs:ntfs would format drive D: with the NTFS format.

For a safe backup, use a removable disk or tape as the destination for your backup files. In case of a total system disk failure, you can use this removable disk or tape and the floppy disk with system settings that you can create using the ASR Wizard to recover your system.