Leopard (Mac OS X - 10.5.x) and Snow Leopard (Mac OS X - 10.6.x) seem to be currently having problems reformatting external drives. This is a common issue on Leopard/Snow Leopardthat is seen on most brands of drives.
Note: This is not a problem with the external drive itself. Rather, it is an issue with the Disk Utility included in Leopard/Snow Leopard.
Suggestions: If partitioning/formatting the drive in Disk Utility fails, there are three options:
1. Ensure that any/all installer (DMG) files are dismounted before trying to prepare an external drive. Simply drag these files to the Trash to proceed.
2. Partition the drive using the OS install CD.
Insert your Operating System install DVD into the CD/DVD drive.
Restart your Mac.
Hold down the Option key while the Mac is rebooting.
Choose the "OS X install Disk" option.
Choose your preferred language.
Choose "Utilities > Disk Utility" from the top-menu.
Follow partition and formatting instructions from step 1-C.
3. If the Disk Utility Partition option fails, it may be necessary to move the external drive to a Windows system to repartition and reformat it.