The harddrive must be formatted into Fat32 partition.
You need a computer that supports LBA48 (48-bit Logical Block Addressing).
DOS FDISK, Partition Magic, Seagate WD Boot Disc are all recommended... which will allow you to go past the 137GB limitation on the Fat32 partition.
USB Flash Memory, USB Hard DRive (External Use):
You can now plug your USB 200GB or whatever you have onto your PS3. All you need to do is follow the below steps:
1) Format your External Hard Drive or Flash Memory (FAT32)
2) Create the Following Folders
3) and Your External Hard Drive is ready to be used.
With the 60GB/20GB you will also have (External HDD which can be more than 500GB)!