I want to backup my own movies (hundreds of DVD's) to and external HDD. In the 360 I understand that it reads FAT32 and HFS+ file structures from HDD. Is there a 32 gb limit? If I format a 2TB FAT32 and fill it will the 360 be able to read the entire drive or only part of it? Realize this has been covered before but could not find it.

Yep it should read the entire drive but I could only play some avi files and mp4s. You can use it as a media extender, I think you can play mkvs and a few other formats if you have windows 7. The 360 isn't the best for a media center but if you rip all your dvds into a format that it can play it will be fine. Even better look for a jtag 360 and wait from xbmc to come out (if it does) it will play anything you throw at it.