Also note that even if you do use a Windows computer to format the drive as NTFS and then put it back in your Mac, you can't write to it without installing third party software. As installed, OS X can only read NTFS.
As Niel noted, Mac OS Extended is the best choice, as long as there's no reason for the drive to be accessible from a Windows computer. If it must be NTFS, then you have these choices for the Mac to enable write access.
A commercial product is Paragon NTFS for Mac.
There are now two versions of the open source NTFS-3G software for OS X. NTFS-3G is the free version, which only works with the 32 bit boot kernel. This version also requires installing MacFUSE. A separate component needed for the free NTFS-3G software.
Tuxera, which provides the funding for the free NTFS-3G has their own paid version. Tuxera NTFS for Mac. This version supports both 32 and 64 bit boot kernels. But NOT the newer 64 bit only kernel of some newer Macs. Tuxera's version eliminates the need for the separate MacFUSE installation, and is faster at accessing NTFS drives.
Edit: Checking Tuxera's site, it looks like they've fixed the issue with the newer Macs which will only boot 64 bit. The note they had on their site at one time about it not working seems to be gone.
what if you used the free NTFS-3G driver off the apple site? can you format a drive with this? can seem to find the answer. the driver will allow you to read and write to an ntfs formatted drive
My suggestion is instead of messing around with either FAT or NTFS format the drive as HFS+.
If you need an external for a PC then get another drive format one for the PC and the other one as HFS+ for the Mac.
It is a much better to have the drive formatted for the platform that is going to use it rather then attempting to use one format for both a PC and a Mac. Drive today are to cheap to both with using one for both a PC and a Mac
If you want to use the drive for both a Mac and a PC, you haven't stated that. It always helps to give all the details when you ask a question. Otherwise, we can only guess about what you may need.
If you're using the external with both Macs and PCs and you're just using it for simple file storage, you could format the drive as ExFAT in lieu of FAT 32: http://ntfs.com/exfat-comparison.htm That would eliminate the 4Gig size barrier. However, I've heard that it is best to do the formatting from a PC, even though it can be done from a Mac.
If you're just using a Mac, then as Allan has stated, HFS+ is the way to go.