I don't agree, FAT32 is old, full of limitations and not as stable as exFAT. You will get better performance changing it to a newer file system, especially if the files are large. Drives are preformatted FAT32 because it supports pre XP OS's as well as other devices, although most of them also support newer file systems including exFAT and\or NTFS.
Since the drive will be used for XP and 7 then there is no good reason not to wipe the drive and try it out. I'm not saying its a guaranteed fix, but it as least the drive will have a upto date file system and I will then be able to assist him further with other suggestions.
FAT32 might be good for you Cookie but I could never recommend using a 15 year old file system made for Windows 95b when there are newer, better alternatives.
Linux wasn't even mentioned so Ext3 is moot.