Help with external hdd best practices. Ntfs or fat32?

Got a ps3 slim running evilnat 4.91 with multiman and webmanmod installed. Upgraded internal storage to 500gb SSD.

I'm trying to add a 2TB external drive and would like format it ntfs. Problem is, according to what I've read, you can only use ISO backups on ntfs and most of my backups are in folder format.

Should I just format my external to fat32? I really don't want to store iso file and also converting folders to iso takes too much time.

Whats the generally accepted best practice for this setup?