The drive does not have to be FAT32. NTFS works as long as its a seperate drive from the root drive. This is similar to the .MOV/.M4V file crashing and stuttering issue. When moving files to a secondary drive, .MOV/.M4V files play wihtout problem.
Correction: It does matter. The drive needs to be a FAT32 drive. This makes the situation much worse than the movie files issues.