Snow Leopard seems to have a bug in the Finder where copying between FAT32 partitions may result in a "file exists" error.
Apple has updated and released a few troubleshooting-based knowledgebase articles, which cover a few recommendations and current problems that people are experiencing in OS 10.5 and 10.6.
Compare the different options for formatting an external hard drive to work with Windows and Mac. And, no: the answer isn't always FAT32.
Locked files may not delete from your drive, which may be caused by standard file locking or from Windows-based locked files on FAT32 drives.